Explain any five features of Income and Expenditure account.

The five main features of Income and Expenditure Account are as follows:

1. It is a nominal account — Income and Expenditure Account is a nominal account. It follows the rule of nominal account: "debit all expenses and losses, credit all incomes and gains." Therefore, expenses and losses are shown on the debit side, while incomes and gains are shown on the credit side.

2. No opening or closing cash balance — The opening and closing balances of cash in hand and cash at bank are NOT recorded in this account.

3. Records only revenue items — Only items of revenue nature are recorded in this account. All capital items are excluded. For example, profit or loss on sale of an asset is recorded in I&E, but the actual sale proceeds (capital receipt) of the asset are not.

4. Items relate only to current year — Incomes and expenses pertaining only to the current accounting year are recorded. For example, subscriptions received in advance for next year are not included as current year's income.

5. Prepared on accrual basis — I&E is prepared on accrual basis like the Profit and Loss Account. All adjustments for outstanding expenses, prepaid expenses, accrued income, income received in advance, depreciation, etc., are made while preparing it.

6. Closing balance shows surplus or deficit — If the credit side (income) exceeds the debit side (expenditure), there is a surplus. If the debit side exceeds the credit side, there is a deficit. Surplus is added to the Capital Fund; deficit is deducted from it in the Balance Sheet.