Accounting Principles and Practices

Option A is correct. Legacy is the amount which a not for profit organisation receive as per the will of a deceased person. As this is a receipt it is recorded on debit side of Receipts and Payments A/c. 

b'At the time of retirement or death of a partner, the books of accounts of firm have to be settled. The outgoing partner or his legal representatives have to be paid their dues. For calculation of correct amount to be paid, it is important that all assets and liabilities must be recorded at their current values and if there is any unrecorded assets and liabilities that should also be recorded. For this. a revaluation account is opened. A revaluation account is prepared to ascertain net profit or loss on revaluation of assets and liabilities and bringing unrecorded items into books. '

Option D is correct. Receipts and payments Account is prepared on cash basis of accounting. It is a summarized cash book. All the cash receipts during the whole year is recorded on debit side. All the cash payments during the whole year is recorded on credit side. incomes or expenses that do not involve the inflow of cash are not recorded in this account.

b'Option C is correct. A Receipt and Payment account is simply a summary of the cash transactions as in the cash book, including opening and closing balances. All cash receipts and cash payments find place in this account whether they are of revenue nature or capital nature. '

Receipt and payments account is a real account just like cash account. Its prepared at the end of the year. All receipts are recorded on the debit side and expenses on the credit side. Its basically a summary of cash book, it records cash expenses and incomes of all nature and is prepared on cash basis. It follows the rule of a real account, debit what comes and credit what goes out. The receipts are credited and the payments are debited. 

Legacy is generally shown on the debit side of receipts and payments accounts. Legacy is the property received by virtue of a will of a person or after his death. Its a capital receipt and hence would not appear in income and expenditure account and will be added to the capital in Balance sheet. It should be capitalised being an item of non-recurring nature. 

Receipt and payment account records all cash receipts and cash payments during the year whether related to current year, previous year or future year. It records both capital and revenue nature receipts and payments. Depreciation being non-cash item is not recorded in this account. Outstanding subscription received and prepaid insurance Premium being cash items are recorded in this account.

Option A 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.

Income and expenditure account is a nominal account and is just like a profit and loss account. All the expenses are recorded on the debit and side and incomes on the credit side. It records all incomes and expenses on accrual basis which means as and when its realised or incurred. Hence items related with the current period are to be recorded only. 

Rent a/c records the various entries regarding rent like advance payment, outstanding rent. 

Subscription amount that has to be credited in the income & expenditure account is calculated after adjusting the various subscription amounts.

Sale of old newspapers is a type of revenue income or receipt. This is because it neither created any liability for firm nor reduces any asset of the firm. Thus, such incomes are revenue receipts.

Receipts and payments account records the inflow and outflow of cash during a period. 

Receipt and Payment account is the summary of cash and bank transactions which helps in preparation of Income and Expenditure account. All receipts and payments whether of capital or revenue nature are included in Receipt and Payment account. This is one of the salient feature of Receipt and Payment account.