Why and by whom is an Income and Expenditure Account prepared?

By whom prepared — Income and Expenditure Account is prepared by non-trading organisations which do not aim at earning profits.

Why prepared — It is prepared to:

1. Ascertain the surplus (excess of income over expenditure) or deficit (excess of expenditure over income) for the accounting year.
2. Show all incomes and expenses of revenue nature relating to the current year, helping management take steps to increase income and reduce expenditure.
3. Serve as the basis for preparing the Balance Sheet of the non-trading organisation.
4. Fulfil the statutory requirements, as non-trading organisations are legally required to prepare it.