Question

State whether the following statement are true or false:

1)=A public library is a non-profit entity.
2)=
Income and Expenditure Account records the expenses and incomes of the current year only.
3)=Capital items are shown in the Income & Expenditure Account.

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Answer 1

Answer:

1) True

2) True

3) False

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Answer 2

Answer:

Explanation of these question is described as below:

Explanation:

1. True; Public library is a non-profit entity. Public library is an organisation which provide service to general public by providing books for their uses. Public library can be funded by Public sources. Public is a not-for-profit organisation which aims not earning profit but providing welfare service to general public.

2. True; Income and Expenditure records the expenses and income of the current year only. Income and Expenditure is like profit and loss account of an enterprise. Income and Expenditure is prepared at the end of accounting period matching expenses with revenue receipt (income) to determine surplus or deficit. Current accounting period's revenue items only are considered and income and expenditures relating to the preceding or succeeding (next) accounting periods are excluded while preparing the Income and Expenditure account.

3. False; Capital items are shown in the Income and Expenditure Account. Income and Expenditure is prepared following accrual basis of accounting, therefore,

• Revenue expenses for the accounting period are taken, whether they have been paid or not
• Revenue income for the accounting period are taken, whether they have been received or not.
• Non-cash expenses such as depreciation are accounted.
• Capital Expenditure such as purchase of land are not considered because they are shown in the Balance Sheet.
• Capital Income such as donation for specific purpose are not considered.  
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