Income & Expenditure Account (Cambridge (CIE) IGCSE Accounting)

Income & Expenditure Account

What is an income and expenditure account?

• An income and expenditure account is a statement that calculates the surplus or deficit

  • A surplus is comparable to a profit for a business

  • A deficit is comparable to a loss for a business

    • Clubs and societies do not operate to make a profit so the terms profit and loss are not used

• The total expenses are subtracted from the income

  • If the income is greater than the expenses then there is a surplus

  • If the income is less than the expenses then there is a deficit

• The income and expenditure account is similar to an income statement of a business

  • Only expenses and income are included

  • Assets and liabilities are not included

• Adjustments are made for:

  • Depreciation of non-current assets

  • Accruals and prepayments of expenses and income

What are the differences between a receipts and payments account and an income and expenditure account?

• The differences are summarised in the total

What is the layout of an income and expenditure account?

• The account is prepared in a similar way as the profit section of the income statement for other types of businesses

• Deal with any adjustments

  • Accruals

    • Subtract accruals from the previous year

    • Add accruals at the end of the current year

  • Prepayments

    • Add prepayments from the previous year

    • Subtract prepayments at the end of the current year

  • Calculate any depreciation charges

• List the income first

  • If there are any associated costs with a source of income then these should be subtracted in this section

    • For example, income from a competition should subtract the cost of the competition's prizes

  • Include any profits calculated on the income statements for any trading activities

• List the expenditure next

  • Include any losses calculated on the income statements for any trading activities

  • Do not include expenses related to specific trading activities

    • These will be included in the income statements for those activities and will contribute to the profit or loss

• Find the surplus or deficit of the year by subtracting the two totals