membership, we will add only 50,000 per year in the income and expenditure account and balance will goes to the fund for life membership account in the balance sheet.
4th Step: Show Adjustments
There are many adjustments which you have to do in the income and expenditure account whose information, you can not get from receipt and payment account. For example, you have to show depreciation of fixed assets in the debit side of income and expenditure account. You may show bad debt if there is any in the debit side of I / E account
5th Step: Find the Balance of I / E Account
Compare debit and credit side of income and expenditure account. If credit side is more than debit side, it will be surplus over expenses. If debit side will more than credit side, it will be deficit.
Example: Following is given the receipt and payment account and adjustment. You have to make income and expenditure account. The car is bought at the end of year. So, there is no question of depreciation. We did not charge depreciation on freehold land.