Commercial Applications
Regarding the components of an Income and Expenditure Account, which statement(s) is (are) accurate?
Statement 1: Income and Expenditure Account is prepared to ascertain the profit or loss of a non-profit organization.
Statement 2: Income and Expenditure Account includes both revenue and capital items.
Statement 3: Income and Expenditure Account is only applicable to businesses and corporations.
Statement 4: Income and Expenditure Account records only cash transactions.
- 1 & 2
- 3 & 4
- Only 1
- 2 & 4
Accounting
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Answer
Only 1
Reason — Statement 1 is correct in essence — Income and Expenditure Account is prepared to ascertain surplus or deficit (the non-profit equivalent of profit/loss) of a non-profit organisation. Statement 2 is INCORRECT because I&E records only revenue items, not capital items. Statement 3 is INCORRECT because I&E is prepared by non-trading organisations like clubs and societies, not by businesses (which prepare Profit and Loss Account). Statement 4 is INCORRECT because I&E is prepared on accrual basis and includes both cash and non-cash items like depreciation and outstanding expenses.
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Related Questions
Assertion (A): The Balance Sheet provides information about an organization's financial position at a specific point in time.
Reason (R): The Balance Sheet includes assets, liabilities, and equity, which reflect the organization's resources, obligations, and owner's interests.
- A is true but R is false
- A is false but R is true
- Both A and R are true and R explains A.
- Both A and R are true but R does not explain A.
The capital fund in the Balance Sheet increases with a surplus shown in the Income and Expenditure Account.
- True
- False
It contains both capital and revenue items.
- Receipts and Payments Account
- Income and Expenditure Account
- Balance Sheet
- None of these
Which of the following is/are correct statement(s)?
Statement 1: Income and Expenditure Account includes both capital and revenue items.
Statement 2: Receipts and Payments Account is a summary of cash transactions over a specific period.
- Only Statement 1 is correct
- Only Statement 2 is correct
- Both Statements 1 and 2 are correct
- Both Statements 1 and 2 are incorrect