Tag: prepration of income and expenditure account and balance sheet

Questions Related to prepration of income and expenditure account and balance sheet

Income and Expenditure account is ______ to account like Profit and Loss account.

  1. real

  2. personal

  3. nominal

  4. expense

Correct Option: C

Income and Expenditure account is prepared by non-trading concern to reveal the surplus or deficit arising out of the operating activities during the accounting period. It is one of the final accounts of non-trading concern like the profit and loss account of the trading concern,

Any revenue expense for which a separate fund is available will be ___________.

  1. debited to that separate fund

  2. debited to income and expenditure account

  3. capital issues and shown in the balance sheet

  4. credited to the separate fund

Correct Option: A

Separate funds are those funds which are earmarked for a specific activity. In case of fund based accounting, all the incomes related to that particular activity is credited to that fund and all the expenses debited to that fund. For example, Building fund, Sports fund etc. 

The revenue receipts are to be shown on ______side.

  1. credit side of income & expenditure

  2. debit side of income & expenditure

  3. asset side of balance sheet

  4. liabilitie side of balance sheet

Correct Option: A

Receipts may be classified as revenue receipts and capital receipts. 

Receipts which are received in the normal course of business are treated as revenue receipts.
Receipts which are received with a specific object is considered as capital receipts.
Revenue receipts are credited to income account and shown in the credit side of  Income & Expenditure account.

Income and Expenditure Account belongs to ______ account.

  1. Real account

  2. Personal account

  3. Nominal accounts

  4. All of the above

Correct Option: C

Every business have to make its financial statement at the end of every year which includes profit & loss account and balance sheet.

All expenses and Income accounts are transferred to profit & loss account/ Income & Expenditure account to know the Profit & Loss of the business.

All expense and Income accounts are classified as nominal accounts hence Income and Expenditure account belongs to nominal account.

Income and Expenditure accounts shows a balance of ________________.

  1. Surplus or Deficit

  2. Cash in hand at the end

  3. Net Profit/Loss

  4. Capital Fund

Correct Option: A

Income and expenditure account is prepared by a non-trading concern to reveal the surplus or deficit arising out of the operating activities during the accounting period.

Income and Expenditure account is ________ by balance sheet whereas Receipt and Payment account is __________by balance sheet

  1. not accompanied, not accompanied

  2. accompanied, not accompanied

  3. not accompained, accompanied

  4. accompanied, accompanied

Correct Option: B

Receipt and Payment is summarized statement of cash transactions during an accounting year hence it is not accompanied by balance sheet. The account through which surplus or deficit of a non-profit-seeking concern is ascertained is called Income and Expenditure account.

The balance of Income and Expenditure account represents:

  1. The balance of cash on that date.

  2. The total cash receipts during the period.

  3. The total cash payments during the period.

  4. The excess of expenditure over income and vice-versa.

Correct Option: D

Income and expenditure is a nominal account, It is similar to profit and loss account. It either represents deficit or surplus at the end of the year. Therefore, it either shows surplus that is excess of income over expenditure or deficit which is excess of expenditure over income.

Income & Expenditure A/c is prepared by transfer of :
(I) Nominal accounts
(II) Real accounts
(III) Personal accounts
The correct answer is ___________________.

  1. (II) and (III) only

  2. (I) and (II) only

  3. All (I), (II) and (III)

  4. (I) only

Correct Option: D

Option D is correct. Nominal account is related to expenses or losses and incomes or gains. Income and Expenditure account is an account prepared by non trading concerns to ascertain surplus or deficit of income over expenditure for a particular period. So Income and Expenditure account is a Nominal account.