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What is the exact definition of an Income & expenditure account compared to a Profit and Loss Account.

What is the exact definition of an Income &...

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What is the exact definition of an Income & expenditure account compared to a Profit and Loss Account.

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GFOXWELL

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By AnonymousUser
15th Sep 2005 09:10

A Profit and Loss Account
'A Profit and Loss Account is used by a profit making (commercial) organisation. Income and Expenditure Accounts (I/E) and Receipts and Payment Accounts (R/P) are used by non profit making organisations.

I/Es are prepared on an accrual basis and include only transactions incurred within, and relevant to, period covered. They can include non cash transactions such as depreciation.
R/Ps include all cash only transactions for the period covered whether they would be relevant on an accrual basis to that period or not. An R/P can therefore include cash transactions for prior years, the current year, or for following years. R/Ps cannot include non cash transactions such as depreciation.'

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By AnonymousUser
14th Sep 2005 12:31

Motivation
Surely the distinguishing factor is the motive of the reporting entity? If a profit is intended, then a profit & loss account is prepared. If a profit is not intended, e.g. in the case of a charity or a club, then an income and expenditure account is prepared. Both are prepared on an accruals basis, as distinct from a receipts and payments account, prepared on a cash basis.

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Stephen Quay
By squay
14th Sep 2005 13:14

Motive
I agree with John. It depends on the motive. A small rural Village Hall for example (like the one I'm involved with) does not exist to make a profit but purely to manage their affairs for the benefit of the local community. Whilst a profit is always welcome it is not the driving force. It is far more appropriate to record the accounts as an I&E account with either a surplus or a deficit as opposed to a profit or loss. It might upset those who make donations to us if they thought they were adding to our "profit" and that maybe their donations were not really required. All surpluses are used for the maintenance of the Hall. Hope this helps.

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By mung1
14th Sep 2005 12:16

Now please don't shoot me down in flames.........
......as I have not researched this answer and merely going on dim and distant memory and practice, but MIGHT it be something along the lines of:

P&L account is prescribed in Companies Act and certain "rules" such as layout/format applies.

I&E account is not prescribed in Companies Act???....but does certainly arrive at the surplus/deficit figure using accruals concept?

I agree that receipts and payments account is something else.

I would like to know the answer as well.

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By deanshepherd
14th Sep 2005 16:46

Nail on head..

Yes, I agree with John.

I forgot that there are such things as non-profit making organisations. I need to get out more I think!


Dean

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By Anonymous
12th Sep 2005 13:05

I agree with Joy
I thought what Dean described was a receipts and payments account.

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By Anonymous
12th Sep 2005 12:16

Not necessarily so...
From my days working in the public sector an income and expenditure account was the equivalent of a p & l account for non profit making organisations. They too were prepared on an accruals basis.

Regards

Joy

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By deanshepherd
12th Sep 2005 09:48

The answers in the question..

An I&E account records only income and expenditure. A P&L account shows the profit or loss.

I&E is produced on a cash basis, P&L is produced on an accruals basis.


Dean


Free Online Helpdesk from MMI, the Surrey Accountants.

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