Income and Expenditure Account: Format and Example

Last reviewed: July 2026.

An income and expenditure account summarises income earned and expenses incurred during an accounting period, usually for a club, association, charity or other not-for-profit organisation. It is prepared on the accrual basis and is similar to a statement of profit or loss, but the final balance is commonly described as a surplus or deficit rather than profit or loss.

It should not be confused with a receipts and payments account. Receipts and payments show cash movements; an income and expenditure account adjusts those movements for amounts relating to other periods and for non-cash expenses such as depreciation.

Receipts and payments versus income and expenditure

• Receipts and payments: cash-based, includes capital and revenue cash flows, and may include amounts relating to earlier or later periods.
• Income and expenditure: accrual-based, reports income earned and expenditure incurred for the current period.
• Statement of financial position: reports assets, liabilities and accumulated funds at the reporting date.

Official charity-reporting rules differ by jurisdiction, legal form, income threshold and reporting framework. For example, Charity Commission guidance in England and Wales distinguishes eligible receipts-and-payments accounts from accrual accounts prepared under the applicable Charities SORP. Always check local law and the organisation’s governing requirements.

Typical income headings

Income may include subscriptions, membership fees, entrance fees, grants, donations, fundraising proceeds, investment income, venue hire and income from activities. The classification should help users understand how the organisation funds its objectives.

Capital receipts, restricted funds and agency collections require separate analysis. A large cash receipt is not automatically current-period unrestricted income.

Typical expenditure headings

Expenditure may include administration, premises, utilities, insurance, programme costs, staff costs, event costs, repairs, depreciation and governance expenses. The categories should reflect the organisation’s activities and reporting framework.

Payments for non-current assets are normally capital expenditure. The asset is recognised in the statement of financial position and depreciation is charged to the income and expenditure account over the periods receiving benefits.

Essential year-end adjustments

Adjustment	Treatment in income and expenditure account	Related statement of financial position item
Subscription received in advance	Exclude from current-year income.	Current liability.
Subscription outstanding for the year	Include in current-year income.	Receivable/current asset.
Expense paid in advance	Exclude from current-year expenditure.	Prepayment/current asset.
Expense owing at year end	Include in current-year expenditure.	Accrual/current liability.
Purchase of equipment	Do not treat the full purchase as routine expenditure.	Recognise the asset; charge depreciation over useful life.
Restricted donation	Account for and disclose according to the applicable fund restrictions.	Restricted fund or related balance.

Worked subscription adjustment

Assume a club receives 48,000 CU in subscriptions during the year. At the start of the year, 2,000 CU was outstanding from members and 1,200 CU had been received in advance. At year end, 3,500 CU is outstanding and 1,700 CU has been received in advance.

A common calculation of current-year subscription income is:

• cash received: 48,000 CU;
• subtract opening subscriptions outstanding collected this year: 2,000 CU;
• add opening subscriptions received in advance now earned: 1,200 CU;
• add closing subscriptions outstanding earned this year: 3,500 CU;
• subtract closing subscriptions received in advance: 1,700 CU;
• subscription income for the year: 49,000 CU.

The closing outstanding amount is a receivable, while the closing amount received in advance is a liability.

Worked expense adjustment

Suppose insurance payments during the year total 7,500 CU. Opening insurance owing was 400 CU, opening prepaid insurance was 600 CU, closing insurance owing is 900 CU and closing prepayment is 800 CU.

Current-year insurance expense is calculated by adjusting cash payments for opening and closing accruals and prepayments. One useful relationship is:

Expense = cash paid + closing accrual − opening accrual + opening prepayment − closing prepayment

Therefore the expense is 7,500 + 900 − 400 + 600 − 800 = 7,800 CU.

Accumulated fund and surplus

The accumulated fund represents the organisation’s residual interest in its net assets. A surplus normally increases the accumulated fund, while a deficit reduces it. Restricted and designated funds may need separate presentation depending on the reporting framework.

The accounting equation remains relevant: assets less liabilities equal accumulated funds. Review the statement of financial position guide and the explanation of accruals and prepayments.

Preparation sequence

1. Start with the receipts and payments records and supporting ledgers.
2. Separate capital receipts and payments from routine income and expenditure.
3. Identify opening and closing accruals, prepayments and amounts in advance.
4. Calculate subscription income and other earned income.
5. Record depreciation and other non-cash adjustments.
6. Present restricted or special-purpose funds correctly.
7. Calculate the surplus or deficit.
8. Update the accumulated funds and prepare the statement of financial position.

Controls and supporting evidence

• maintain a membership register and reconcile it to subscription income;
• retain grant and donation conditions;
• use authorised payment documentation;
• reconcile bank and cash balances;
• maintain a non-current asset register;
• review restricted-fund balances;
• approve year-end journals and estimates.

For the recording foundation, see source documents and books of prime entry, the accounting process, and the trial balance worked example.

Key takeaway

An income and expenditure account converts cash records into an accrual-based measure of the period’s financial result. Accurate preparation requires period adjustments, separation of capital and revenue items, correct treatment of funds, and reconciliation to the statement of financial position.

Official references: Charity Commission reporting guidance, official accrual-account definitions, and accrual-account templates.

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