Steps To Prepare Income in addition to Expenditure Account

Steps To Prepare Income In Addition To Expenditure Account

The steps are as follows:

Steps To Prepare Income In Addition To Expenditure Account

1. Ignore opening in addition to dosing cash in addition to bank balances appearing in receipts in addition to payments account.

Steps To Prepare Income In Addition To Expenditure Account

2. Eliminate all items of capital receipts in addition to payments.

Steps To Prepare Income In Addition To Expenditure Account

3. Ascertain income of the relevant year by deducting via the total receipts the income received on account of previous in addition to future years in addition to by adding the income accrued due from the year nevertheless not received in addition to income received from the previous year nevertheless relating to This kind of year.

Steps To Prepare Income In Addition To Expenditure Account

4. Ascertain expenditure of the relevant period by deducting expenditure both relating to preceding period in addition to succeeding period via the total payments in addition to by adding the expenditure outstanding at the end in addition to expenditure prepaid from the beginning.

Steps To Prepare Income In Addition To Expenditure Account

5. Make adjustments, as per additional information, such as depreciation, bad debts etc., if any.

Steps To Prepare Income In Addition To Expenditure Account

6. The income in addition to expenditure account, when balanced, will disclose surplus (if the credit side is actually bigger) or deficit (if the debit side is actually bigger). If surplus i.e. excess on income over expenditure add the idea to the capital or accumulated fund. However, if deficit i.e., excess of expenditure over income deduct the idea via the capital or accumulated fund.

Distinction between receipt in addition to income

“Receipt” means total cash received during the current year. nevertheless “income” means total income earned for the current year.

The points of distinction between the two are stated below :-

Receipt

1. Any cash received in regarded as receipt.

2. the idea is actually not confined to any accounting year. In additional words, the idea may include cash received for any year-past, present or future.

3. the idea may be of both capital in addition to revenue nature.

4. In case of receipt, cash increases equal to amount of receipt.

5. An item can’t be called “receipt” unless equivalent amount of cash received.

6. the idea is actually recorded on debit side of cash book.

7. the idea is actually not included in final accounts. In additional words, the idea is actually not considered in determining the result of concern.

Income

1. Any cash received mayor may not be regarded as income. Cash received for current year is actually regarded only as income.

2. the idea is actually confined to current accounting year only.

3. the idea is actually of revenue nature only.

4. In case of income cash may not increase equal to the amount of income.

5. An item may be “income”, even though cash has not been received.

6. the idea is actually credited to income in addition to expenditure account.

7. the idea must be considered in final accounts.

Distinction between payment in addition to expenditure

Payment means total cash paid during the current year. nevertheless expenditure means total expenses incurred for the current year only.

The points of distinction between the two, are as follows :-

Payments

1. Any cash paid in regarded as payments.

2. the idea is actually not confined to any accounting year, i.e. the idea may include cash paid for any year-past, present or future.

3. the idea may be of both capital in addition to revenue nature.

4. In case of payment, cash decreases equal to amount of payment.

5. An item can’t be called “payment” unless equivalent amount of cash is actually paid.

6. the idea is actually recorded on credit side of cash book, i.e. credited to cash account.

7. the idea is actually not included in final accounts. In additional words, the idea is actually not considered in determining the result of concern.

Expenditure

1. Any cash paid mayor may not be regarded as expenditure.

2. the idea is actually confined to current accounting year only.

3. the idea is actually of revenue nature only.

4. Cash mayor may not decrease equal to the amount of expenditure.

5. An item may be “expenditure” even though cash has not been paid.

6. the idea is actually debited to income in addition to expenditure account.

7. the idea must be considered in final accounts.

Steps To Prepare Income in addition to Expenditure Account

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