AccountsISC Class 11 · Accounting for Not-for-profit Organisations

Income and Expenditure Account and Balance Sheet: ISC Class 11 Accounts

Updated 17 October 2026 · Fact-checked

The Income and Expenditure Account is the nominal account of a not-for-profit organisation that works like a Profit and Loss Account: revenue expenses on the debit side, revenue incomes on the credit side, accrual basis, with the balancing figure a surplus (excess of income) or deficit. The surplus is added to the Capital Fund in the Balance Sheet.

Only revenue items enter the account; the surplus (balancing figure) is added to the Capital Fund, while capital items stay out.

Illustration drawn for QuestionBuddy.

Understand Income and Expenditure Account, Subscriptions and Balance Sheet

Contents. Debit: revenue expenses of the year (salaries, rent, depreciation, outstanding added, prepaid removed). Credit: revenue incomes (subscriptions of the year, general donations, interest, proceeds of events). Capital items (life membership fees, special donations, legacies, capitalised entrance fees, purchase of assets) are left out. Closing balance: surplus (credit exceeds debit) or deficit.

Subscriptions of the year. Subscriptions for the year = Received + Outstanding at close - Outstanding at start + Advance at start - Advance at close. Only this amount goes to the credit side.

Same adjustment for expenses. Expense = Paid + Outstanding at close - Outstanding at start - Prepaid at close + Prepaid at start.

Special items. *Sale of old asset:* profit or loss on it is an income or expense; sale price reduces the asset. *Sports material / stock:* consumption = opening + purchases - closing. *Depreciation* is a non-cash expense debited. *Specific-purpose fund:* donations for it are credited to the fund, expenses are debited to the fund.

Capital Fund. Opening Capital Fund is opening assets minus opening liabilities. Closing Capital Fund = Opening Capital Fund + Surplus (or - Deficit) + capitalised entrance fees and life membership + legacies.

Balance Sheet. Assets: cash, bank, subscriptions outstanding, prepaid expenses, investments, fixed assets (at cost less depreciation). Liabilities: Capital Fund, outstanding expenses, subscriptions in advance, special funds.

Opening Capital Fund from the balance sheet. Opening Capital Fund = Total assets - Total liabilities of the opening balance sheet.

Income and Expenditure Account, Subscriptions and Balance Sheet: key facts

Subscription of the year: Income = Received + Closing outstanding - Opening outstanding + Opening advance - Closing advance | Credit to Income and Expenditure; Accrual basis.
Expense of the year: Expense = Paid + Closing outstanding - Opening outstanding - Closing prepaid + Opening prepaid | Debit to Income and Expenditure; Same logic.
Capital Fund: Closing fund = Opening fund + Surplus (or - Deficit) + Capital receipts | Opening fund = Assets - Liabilities; Shown on the liabilities side.

How to answer Income and Expenditure Account, Subscriptions and Balance Sheet questions

Start from the Receipts and Payments Account and convert it to an accrual basis.

1Remove capital receipts and capital payments.
2Adjust each revenue item for outstanding, prepaid and advance.
3Add non-cash items such as depreciation.
4Balance the account for surplus or deficit and carry it to the Capital Fund.

Income and Expenditure Account, Subscriptions and Balance Sheet in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Subscription adjustment

Suppose a gym club received Rs 52,000 as subscriptions in the year; Rs 4,000 was owed from last year and received now, Rs 6,000 is still due for this year, Rs 2,000 had been received earlier for this year, and Rs 3,000 has been received for next year.

Find the subscription income of the year.

Try it first, then show the solutionSolution

52,000 - 4,000 (last year) = 48,000.
Add due Rs 6,000 and prepaid-in-advance Rs 2,000 received earlier = 56,000.
Subtract advance for next year Rs 3,000.

Answer: Rs 53,000

Memory hook: Outstanding in, advance out.

Tricks to remember Income and Expenditure Account, Subscriptions and Balance Sheet

Short memory aids. Say each one aloud once, then use it on a question the same day.

I&E = P&L of a club
Revenue only, accrual basis, result is surplus or deficit.
Use it when: Nature.
Subs formula
Add closing dues, deduct opening dues; deduct closing advance, add opening advance.
Use it when: Subscriptions.
Capital stays out
Life membership and legacies go straight to the fund.
Use it when: Capital items.

Income and Expenditure Account, Subscriptions and Balance Sheet: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Deficit or surplus · 1 mark · MCQBoard level

If the credit side of the Income and Expenditure Account is more than the debit side, the balance is a:
(a) deficit (b) surplus (c) loss (d) capital

Try it first, then show the solutionSolution

Excess of income over expenditure is a surplus.

Answer: (b) surplus

Example 2: Treatment of items · 5 marks · Short answerBoard level

State whether each is shown in the Income and Expenditure Account: (i) life membership fee (ii) general donation (iii) purchase of sports goods used up (iv) legacy (v) honorarium. (5 marks)

Try it first, then show the solutionSolution

Life membership and legacy are capital receipts: not shown.
General donation is revenue: credit.
Sports goods consumed and honorarium are revenue expenses: debit.

Answer: (i) No, capital fund; (ii) Yes, credit; (iii) Yes, debit (consumed); (iv) No, capital fund; (v) Yes, debit.

Example 3: Prepare the account · 6 marks · Long answerHarder board level

A club's receipts: subscriptions Rs 70,000, entrance fees Rs 8,000 (capitalised), donations (general) Rs 10,000. Payments: salaries Rs 30,000, rent Rs 14,000, printing Rs 5,000. Further: subscriptions outstanding at end Rs 6,000 and at start Rs 4,000; rent outstanding at end Rs 2,000; depreciation Rs 3,000. Prepare the Income and Expenditure Account. (6 marks)

Try it first, then show the solutionSolution

Subscriptions = 70,000 + 6,000 - 4,000 = Rs 72,000.
Rent = 14,000 + 2,000 = Rs 16,000.
Income = 72,000 + 10,000 = 82,000. Expenditure = 30,000 + 16,000 + 5,000 + 3,000 = 54,000.
Surplus = 82,000 - 54,000 = Rs 28,000.

Answer:

Expenditure	Rs	Income	Rs
To Salaries	30,000	By Subscriptions	72,000
To Rent	16,000	By Donations	10,000
To Printing	5,000
To Depreciation	3,000
To Surplus	28,000
Total	82,000	Total	82,000

Example 4: Capital Fund and balance · 5 marks · Long answerHarder board level

Opening balance sheet: cash Rs 12,000, bank Rs 38,000, furniture Rs 40,000, subscriptions outstanding Rs 4,000; outstanding salaries Rs 6,000. Find the opening Capital Fund. With a surplus of Rs 28,000 and life membership fees of Rs 15,000 received during the year, find the closing Capital Fund. (5 marks)

Try it first, then show the solutionSolution

Assets = 12,000 + 38,000 + 40,000 + 4,000 = 94,000.
Opening fund = 94,000 - 6,000 = Rs 88,000.
Closing fund = 88,000 + 28,000 + 15,000 = Rs 1,31,000.

Answer: Opening Capital Fund Rs 88,000; closing Rs 1,31,000.

Example 5: Surplus mystery · 5 marks · Long answerHOTS / competency

A club's R&P account shows cash increase of Rs 20,000. During the year it bought sports equipment of Rs 25,000 (capital), received special donation Rs 10,000 and subscriptions in advance of Rs 3,000, and has outstanding salaries of Rs 5,000. Reconcile the cash increase with a surplus figure, assuming no other items. (5 marks)

Try it first, then show the solutionSolution

Start with cash increase 20,000.
Add back capital payment: +25,000. Subtract capital receipt: -10,000.
Subtract advance subscription (not this year's income): -3,000. Subtract unpaid salaries: -5,000.
Surplus = 20,000 + 25,000 - 10,000 - 3,000 - 5,000 = Rs 27,000.

Answer: Surplus Rs 27,000.

Where students lose marks in Income and Expenditure Account, Subscriptions and Balance Sheet

The slips examiners see most often, and what to write instead.

Mistake: Showing the full cash receipt of subscriptions
Ignoring outstanding items.
Wrong working
By Subscriptions 70,000
Right working
By Subscriptions 72,000
Do this: Apply the subscription formula.
Usually costs: 2 marks.
Mistake: Including purchase of assets as expenditure
Cash left the club.
Wrong working
To Sports equipment 25,000
Right working
Asset in balance sheet
Do this: Capital payments are excluded.
Usually costs: 2 marks.
Mistake: Putting entrance fees in income when capitalised
Not reading the question.
Wrong working
By Entrance fees 8,000
Right working
Added to the Capital Fund
Do this: Check "to be capitalised".
Usually costs: 1-2 marks.

Exam tips

Show the working for subscriptions and expenses in a note.
Mention "to Capital Fund" for the surplus in the balance sheet.
Do not put opening or closing cash in the Income and Expenditure Account.

Practice questions on Income and Expenditure Account, Subscriptions and Balance Sheet

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
Subscriptions received in advance at the end of the year are shown in the balance sheet as a:
(a) current asset (b) liability (c) revenue (d) capital fund item
Hint
The club owes service.
Answer
(b) liability
Q2 · 3 marks · Short answerBoard level
State three differences between the Income and Expenditure Account and the Receipts and Payments Account. (3 marks)
Hint
Nature, basis, items.
Answer
I&E is a nominal account, on accrual basis, with revenue items only and shows surplus or deficit; R&P is a real account, on cash basis, with capital and revenue items and shows cash balances.
Q3 · 5 marks · Long answerHarder board level
Subscriptions received Rs 84,000; outstanding at start Rs 6,000, at end Rs 9,000; advance at start Rs 2,000, at end Rs 5,000. Find subscriptions for the year. Salaries paid Rs 36,000; outstanding at start Rs 3,000 and at end Rs 5,000. Find salaries for the year. (5 marks)
Hint
Apply both formulas.
Answer
Subscriptions = 84,000 + 9,000 - 6,000 + 2,000 - 5,000 = Rs 84,000. Salaries = 36,000 + 5,000 - 3,000 = Rs 38,000.
Q4 · 6 marks · Long answerHarder board level
Receipts: subscriptions Rs 48,000 (including Rs 3,000 for last year), donations for building Rs 20,000, interest Rs 5,000. Payments: salaries Rs 22,000, printing Rs 4,000, furniture Rs 15,000. Subscriptions due at year end Rs 4,000; furniture depreciation Rs 1,500. Find the surplus or deficit and state which items are excluded. (6 marks)
Hint
Subscriptions for the year = 48,000 - 3,000 + 4,000.
Answer
Subscriptions = 49,000. Income = 49,000 + 5,000 = 54,000. Expenditure = 22,000 + 4,000 + 1,500 = 27,500. Surplus = Rs 26,500. Building donation and furniture purchase are excluded.
Q5 · 4 marks · Short answerHOTS / competency
A club's deficit is Rs 12,000 while its cash increased by Rs 6,000. Give two possible reasons for this and say which statement the members should look at to judge the year's performance. (4 marks)
Hint
Capital receipts and non-cash expenses.
Answer
Cash may have increased because of capital receipts (life membership, special donation) and because depreciation reduces the surplus without using cash. Members should read the Income and Expenditure Account.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Surplus is added to?Show answer
The Capital Fund.
2.Is I&E a real account?Show answer
No, nominal.
3.Treatment of life membership fee?Show answer
Capital; added to Capital Fund.
4.Basis of I&E?Show answer
Accrual.
5.Opening Capital Fund?Show answer
Assets minus liabilities.

Income and Expenditure Account, Subscriptions and Balance Sheet: frequently asked questions

Is depreciation in I&E?

Yes, as an expense.

Where are outstanding subscriptions shown?

As an asset in the balance sheet.

What about profit on sale of an asset?

Credited to I&E as income.

Can the club have a profit?

It is called a surplus.