Question

Income and expenditure account shows transactions of capital nature for the accounting year

[True or False]​

Answer 1

ANSWER :

★ False

• ✎ Income and Expenditure Account shows transactions of capital nature for the accounting year ➛ this statement is False.

• ✎ Correct Statement ➛ Income and Expenditure Account shows transactions of revenue nature for the accounting year.

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EXPLANATION :

❒ Income and Expenditure Account :-

• ➺ Income and Expenditure Account is a revenue account prepared by not for profit organizations as it is like Profit and Loss Account prepared by profit earning organizations.

• ➺ The object of Income and Expenditure Account is to find out the surplus or deficit of an organization of an accounting period for which it is prepared.

• ➺ Only revenue items i.e., revenue incomes and revenue expenses are taken into account while preparing Income and Expenditure Account. Items of capital nature are not taken into this account.

• ➺ Income and Expenditure Account is prepared on the accrual basis of accounting.

• ➺ Incomes are shown in the credit side and Expenditures are shown in the debit side of Income and Expenditure Account.