Difference between Income and Expenditure A/c and Profit and Loss A/c
Income and Expenditure A/c and Profit and Loss A/c are two different accounts that are often confused as the same. The former is an account which is prepared by NPOs on an accrual basis to record income and expenses of revenue nature only. However, the latter is prepared by organisations with profit-earning motive. These organisations prepare Profit & Loss A/c to ascertain net profit or net loss of the organisation.
What is Income and Expenditure A/c?
The Income and Expenditure Account is prepared by Not for Profit Organisations to ascertain the surplus or deficit for a particular time period. It is prepared at the end of the accounting year by debiting all the expenses and losses and crediting all incomes and gains of the concerned year. The Income and Expenditure Account is prepared on an accrual basis of accounting and records income and expenses of revenue nature only.
What is Profit and Loss A/c?
The Profit and Loss Account is prepared by business organisations whose main motive is to earn profit. The main motive of Profit and Loss A/c is to ascertain net profit or net loss for an accounting year. It is prepared on the basis of Trial Balance.
Difference between Income and Expenditure A/c and Profit and Loss A/c:
||The main objective of preparing Income & Expenditure A/c is to ascertain the surplus or deficit(difference between income and expenditure, as the case may be).
||The main objective of preparing Profit & Loss A/c is to ascertain the net profit or loss of the accounting year of the business firm.
||The Non-Profit organisations prepare income & Expenditure A/c.
||Business enterprises prepare profit & Loss A/c.
||Income & Expenditure A/c collects information from Trial Balance when complete sets of books and from Receipt & Payment A/c when sets of books of accounts are not maintained.
||Profit & Loss A/c collects information from Trial Balance and other given transactions.
||The closing balance of this account is termed as the surplus or deficit.
||The closing balance of this account is termed as the net profit or net loss.
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