Everyone knows that the Non-trading organizations prepare Receipts and Payments Account for recording cash and bank transactions. In order to record the Expenses and Incomes of the concern, the concept of ‘Income and Expenditure Account’ came into existence.
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They also receive a lot of donations and subscription fees. They collect various kinds of fees from its members in order to sustain their existence. If it is true that they can earn profits, then it is also true that they need to prepare certain accounts which shows their profit records.
One of the major advantage of this account that it helps the concern to know about its revenues. It gives the concern about their past records and the current trends. Moreover, it will provide the concern relevant information for their futuristic course of action.
It tells them their major source of profits and their loopholes where they are spending a lot. It helps them to control the extravagant expenditure approach.
Investors are very much interested in the profits and losses of the concern. In the case of non-trading concerns, it is especially the government which is interested in the statements of the concern.
It is because they provide the concern with many facilities in the form of subsidies and donations. They want to analyze the working and the position of the concern. It helps them to decide the number of futuristic grants and donations.
Nobody can deny the fact that whenever there are advantages, there are certain disadvantages too. In the case of the Income and Expenditure Account, there is only one major disadvantage.
This disadvantage is ‘Misinterpretation of Data’. As we have seen above also that the concern is highly dependent on the government for various funds and facilities.
The government is only interested to help only those concerns which are performing well. The wellness of the concern is visible by its statements.
In order to show their competence, it is mostly seen that they end up doing window-dressing of their statements. This becomes a very major disadvantage of this account.
Question:Following is the receipt and payment account of a club for the year ended 31.12.2019. Prepare the income and expenditure account for the club.
