Question

Mention any two features of the Income and Expenditure Account.

Explain any five features of Income and Expenditure account. 

Explain any two features of an income and expenditure account.

Answer 1

The main features of Income and Expenditure Account are as follows:

1. It is a nominal account. Therefore, expenses and losses are debited and incomes and gains are credited.
2. The opening and closing balances of cash in hand and cash at bank are not recorded in it.
3. While preparing Income and Expenditure Account, only items of revenue nature are recorded, and all items of a capital nature are not included. For example, the profit earned or loss suffered on the sale of an asset will be recorded in it but the amount received from the sale of an asset will not be recorded in it.
4. Incomes and expenses pertaining to only current year are recorded in it. All items of income and expenditure which pertain to previous years and future years are not recorded in it.
5. Income and Expenditure Account is prepared in the same manner in which the Profit and Loss Account is prepared. Therefore, all adjustments for the current year regarding outstanding expenses, prepaid expenses, incomes in arrears, income received in advance, depreciation, etc., are made while preparing it.