Income And Expenditure Account: Meaning - SS2 Accounting Lesson Note
An income and expenditure account is a financial statement that shows the income earned and the expenses incurred by an organization during a specific period, usually a year.
The income section of the account includes all the revenue generated by the organization, such as sales, interest income, and rental income. The expenditure section of the account shows all the costs incurred by the organization to generate this income, such as salaries, rent, and utilities. Below is a format of the income and expenditure account:
|
Income (₦) |
Expenditure (₦)
Sales
Subscription
Bank loan
Loan
Balance b/d
X
X
X
X
XX
X
Purchases
Rent
Equipment
Wages and salaries
Insurance
Printing
Bank interest
Electricity bill
Bank loan repaid
General expenses
Balance c/d
X
X
X
X
X
X
X
X
X
X
X
XX
The income and expenditure account is used to determine the net income or loss of the organization for the period. If the income is higher than the expenses, then there is a net profit, and if the expenses are higher than the income, then there is a net loss.
This statement is helpful for businesses, nonprofits, and other organizations to assess their financial performance and make decisions about future operations. It can also be used to prepare tax returns, secure loans, and attract investors.