What is the difference between Profit & Loss account and Income & Expenditure account?

Profit & loss acount records only those amounts which are truely our gains or loses like these amounts are free from all expenses and investments. All investment & expenses have been deducted from our income to record profit or loss accounts.

While income & expense accounts are those which records all inward and outward flow of cash which support our business, generated by either selling our porducts or services & incured during our business process.

Income & Expenditure is nominal account and prepared for the purpose of calculating surplus or deficit.The major scoure of incomes subscrpition, donation and grants.Profit & Loss Accounts is nominal accounts prepared for the purpose of calculating net profit or loss of business enterprises. The major scoure of income is revenue received from sale of goods and services by business enterprises.

Income &Exp account is prepare at tne end ofthe period to ascertain the surplus and deficit of the period when P&L is prepare to ascertain the profit and loss of the period.

 

Profit and loss account depending on relation between the sales value and operation cost. but the income and expenditure account is related to finance policies and procedures.

The profit and loss account is T-account that shows on the Debit side the incomes/sales and on credit side the expenditures the balance on this account  is transferred to the owners equity.

Income and expenditure account is the account that is used by not for profit organisations or entities to determine either the surplus or deficit.

P& L is for the corporate ( profit based organization ) whereas Income & E is for Non profit organization (NGO) etc

1- Profit and Loss Account Account The profit or loss for the year is closed until the balance sheet shows the net profit or net loss 2- The income statement is a list showing revenues minus expenses until the net income subject to zakat or tax is reached. It is one of the main components of the basic financial statements submitted to the official bodies and decision makers

Income and expenditure account and profit and loss account both are prepared for finding net profit or net loss of organisation. Both are showing all the revenue expenditures and incomes for the year. But there are some fundamental differences between both which we are explaining with following basis.

Basis of Difference

 

 

Income and Expenditure A/c

 

 

 Profit and Loss  A/c

         

1. Definition

 

Income and expenditureaccount is account which is prepared for finding the excess of income over expenditures or excess of expenditures over incomes.

 

Profit and loss account is the account which is prepared for finding net profit or net loss.

2. Not for Profit organisation or Business

 

Income and expenditureaccount is prepared by not -for profit organisation whose aim is not to earn money.

 

Profit and loss account is prepared by business whose aim is to earn money.

         

3. Basis of Preparation 

 

Income and expenditureaccount is prepared on the basis of receipt and payment account and some other information

 

Profit and loss account is prepared on the basis of trial balance and some other information.

         

4. Balance of Account 

 

When we compare debit and credit side of this account, balance will be surplus or deficit. 

 

The balance of profit and loss account will be net profit or net loss. 

 

profit and loss accounts indicates how the revenues are transformed into net profit or net loss during the specified tenure. The income and expenditure account determines surplus or deficit of income over expenditure for particular time frame

profit and loss account it shows profit or loss for trading company 

while income and expenditure it shows surplus or deficit for non rofit organization

The first one is for profit making organizations while the later is for non profit making organizations