Income is money flowing to you - incoming cash or payments. Expenditures are money flowing away from you - payments which you make; expenses.

Difference between income and expenditure on the basis of accounting, closing balance, and period

Income and expenditure are two important terms in accounting, which play a crucial role in determining a company's financial health. Income refers to the money that a company earns by selling its products or services, while expenditure refers to the money that a company spends on various activities such as salaries, rent, and supplies. In this article, we will discuss the difference between income and expenditure on the basis of accounting, closing balance, and period.

Basis of accounting:
- Income: Income is recorded when it is earned, irrespective of whether it has been received or not. This means that if a company has completed a project and is waiting for payment, the income from that project will still be recorded in the books of accounts.
- Expenditure: Expenditure is recorded when it is incurred, irrespective of whether it has been paid or not. This means that if a company has received an invoice for a service, the expenditure will be recorded in the books of accounts even if the payment has not been made yet.

Closing balance:
- Income: Income is added to the closing balance of a company. This means that if a company has earned a profit, the closing balance will be higher than the opening balance.
- Expenditure: Expenditure is subtracted from the closing balance of a company. This means that if a company has incurred a loss, the closing balance will be lower than the opening balance.

Period:
- Income: Income is recorded on an accrual basis, which means that it is recorded in the period in which it is earned, irrespective of when it is received. This means that if a company has completed a project in December but has not received payment until January, the income will still be recorded in the books of accounts for December.
- Expenditure: Expenditure is recorded on a cash basis, which means that it is recorded in the period in which it is paid, irrespective of when it was incurred. This means that if a company has received an invoice for a service in December but pays it in January, the expenditure will be recorded in the books of accounts for January.

Conclusion:
In conclusion, income and expenditure are two important terms in accounting that have different implications on the basis of accounting, closing balance, and period. Understanding these differences is crucial for companies to accurately record their financial transactions and determine their financial health.