4th Step : Measure the Performance of Fund
If donated fund is used effectively and honestly , it is the best performance of Fund . For measuring , the performance of project , we also make our financial statement on the basis of different funds . For example , we will be interested to know what current and fixed assets have been bought from school fund . We are also interested to know that every Rupee is consumed for the project or not .
How to Prepare Income and Expenditure Account
Income and expenditure account is prepared in non profit organisation whose aim is not to earn money for personal benefits but they distribute the profit for welfare activities . So , for showing the organisation different from for-profit organisation , they prepare income and expenditure account . It is prepared just like preparing of profit and loss account . In the debit side , we show all the expenses whether they has been paid or not . In the credit side , we show all the incomes whether they have been received or not . One thing , we should remember that we will show only the expenses and incomes which are not the capital nature .
Now , you should learn its following steps 1st Step : Get the Raw Data
Income and expenditure account is made on the basis of raw data which we get from trial balance . All revenue nature expenses and incomes are added in the income statement . In case , if we did not make the trial balance , we can make income and expenditure account on the basis of receipt and payment account . For charging the depreciation , you need opening balance of fixed asset which you can find from opening balance sheet . Now , we tell you what you have to take from receipt and payment account .
2nd Step : Show the Expenses and Incomes from Receipt and Payment Account
Now , we have explaining , how you can convert the payments and receipts of receipt and payment account into the incomes and expenses of income and expenditure account .