Question

out of the following which item is not recorded in income and expenditure account:
(a) sales of grass
(b) locker rent
(c) interest received
(d) interest received on prize fund investment​

Answer 1

Answer:

Not entering in income and expenditure account

Explanation:

1. The question is not complete and clear whether these entries omitted earlier and came in the knowledge after close of financial year or within financial year. I am considering that the entries of omission located after the end of financial year.  However amount is also not given)

Locker rent a/c Dr  

To Miscellaneous income *sale of grass  

To Interest a/c

To Interest a/c (prize fund investment)

(difference of amount in debit and credit may be debited/credited to income and expenditure account for the year)

2. I am considering that the entries of omission located before the end of financial year.  However amount is also not given)

one can make the entries as usual.

If income and expenditure a/c has already been prepared then, we will have to open an income and expenditure adjustment account so as to arrive at the net profit/earning in a financial year.

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Answer 2

Answer:

The correct option is (d)interest received on prize fund investment​

Explanation:

Income and Expenditure Account

The non-trading businesses create the income and expenditure account to assess whether there is an excess or a deficit of income over expenditures for a specific period of time. When creating the income and expense accounts of non-trading companies, the cumulative or accrual concept of accounting is strictly adhered to. It is prepared as a component of non-trading entities' final accounts and is equivalent to the profit and loss account presented by for-profit corporations.

Special Funds-

• Different from a capital fund is a special fund. It is a fund established by nonprofit organisations for a specific objective, such as the construction of a new building, the acquisition of machinery or equipment, etc. The money for the establishment of the special fund is obtained by exceptional donations, income that is in excess of expenditures, and/or unique fund-raising initiatives undertaken by the organisation.
• For a set period of time, the quantity of money is invested in a few reliable assets. The investment is sold at the conclusion of a predetermined time period, and the proceeds are put to the intended use of the fund.

Treatment of Special Funds-

• On the liabilities side of the balance sheet of non-profit organisations, the special fund is a balance sheet item. On the assets side, the investment associated to the special fund is displayed as an asset.
• When the purpose for which each special fund was founded has been achieved, it is transferred to the capital fund.

Since, Prize Fund is a special fund hence it will not be recorded in the Income and Expenditure account.

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