Commercial Applications
Answer
A non-trading sports organisation (such as a cricket club, sports academy or athletic association) will benefit from an Income and Expenditure Account in the following ways:
Ascertaining surplus or deficit — The I&E account shows whether the sports organisation has a surplus or a deficit during the year. For instance, the club can know if subscriptions and tournament receipts have exceeded sports material expenses, prize money and salaries.
Identifying revenue sources — The credit side of I&E shows all revenue incomes. This helps the management identify which sources of income are growing and which are weakening.
Identifying expenditure heads — The debit side shows all revenue expenses. This helps in cost control and budgeting.
Comparing periods — By comparing the I&E account of different years, the sports organisation can analyse trends.
Basis for preparing Balance Sheet — The surplus or deficit from I&E is transferred to the Capital Fund in the Balance Sheet.
Decision-making for sports promotion — Knowing the surplus helps the organisation decide on activities.
Statutory requirement — Many sports clubs and societies are required by law to prepare an Income and Expenditure Account. It thus fulfils legal obligations and increases transparency for members and donors.