Tag: prepration of income and expenditure account

Questions Related to prepration of income and expenditure account

Surplus of Income and Expenditure Account is deducted from the capital/general fund.

book keeping and accountancy accounting for not-for-profit organisation financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations prepration of income and expenditure account

  1. True

  2. False

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Correct Option: B
Explanation:

False. Surplus of Income and expenditure account is added to the capital/general fund. Surplus is arrived when there is excess of income over expenditure hence it is addition to the and fund and should be added to the capital fund. 

State True or False:
Scholarships granted to students out of funds provided by government will be debited to Income and Expenditure Account. 

book keeping and accountancy accounting for not-for-profit organisation financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations prepration of income and expenditure account

  1. True

  2. False

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Correct Option: B
Explanation:

False. Scholarships granted to students out of funds provided by government will be deducted from the fund provided by government. If there appears any fund respective incomes/expenses will added/deducted from the respective fund. 

If there appears a sports fund, the expenses incurred on sports activities will be shown on the debit side of Income and Expenditure Account. 

book keeping and accountancy accounting for not-for-profit organisation financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations prepration of income and expenditure account

  1. True

  2. False

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Correct Option: B
Explanation:

False. If there appears a sports fund, the expenses incurred on sports activities will be deducted from the sports fund. If there appears any fund respective incomes/expenses will added/deducted from the respective fund. 

Income and expenditure accounts show ______________.

book keeping and accountancy accounting for not-for-profit organisation financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations prepration of income and expenditure account

  1. Cash available to an organization

  2. Closing capital of an organization

  3. Cash available in the bank account

  4. Surplus or deficit for the current accounting Period

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Correct Option: D
Explanation:

Income and Expenditure account is prepared to calculate the surplus or deficit with the company for current accounting period. The previous year transaction and the various cash transactions are not considered while preparing this account beacuse such transaction are related to receipt and payment account.

Given : Stock of stationery on Jan. 1, 2015 Rs 400
Stock of stationery on Dec. 31, 2015 Rs 100
Payment for stationery during 2015 Rs 1,200
Creditors for stationery on Dec. 31, 2015 Rs 150.
What is the amount of stationery that will be posted to the Income and Expenditure A/c for the year ending Dec. 31, 2015?

book keeping and accountancy accounting for not-for-profit organisation financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations prepration of income and expenditure account

  1. Rs 1,150

  2. Rs 1,650

  3. Rs 850

  4. Rs 1,050

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Correct Option: B
Explanation:

Calculation of Amount of stationary for the year ended 31st March, 2015

Opening stock of stationary ,1st Jan 2015  =   400
+ Payment made during the year                =  1200
+ Creditors for stationary on 31st Dec         =  150
-  Closing stock as on 31st Dec ,2015          =  (100)
                                                                       =  1650 Rs.

Receipts and payment account shows ___________.

book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

  1. income and expenditure

  2. cash receipts and payments

  3. assets and liabilities

  4. profit on sale

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Correct Option: B
Explanation:

Receipts and payments account is prepared by taking the information from cash book. It records all the cash receipts and payments including revenue and capital.

Expenditure incurred by a publisher for acquiring copyrights is an example of _______________.

book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

  1. Capital expenditure

  2. Revenue expenditure

  3. Deferred revenue expenditure

  4. None of the above

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Correct Option: A
Explanation:

A capital expenditure is a expenditure to acquire and maintain long term assets. Capital expenditure is done on more valuable assets that have long term use in the business. Long term usually means more than a year. Expenditure incurred by a publisher for acquiring copyrights is an example of Capital expenditure.

Which of the following accounts mostly begins with an opening balance?

book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

  1. Receipts and payments account

  2. Income and expenditure

  3. Both of the above

  4. None of the above

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Correct Option: A
Explanation:

Receipts and payments account mostly begin with an opening balance as it is nothing but cash account. A receipts and payment account is just like a cash account hence it begins with opening balance and ends with closing balance of cash.

The total of all payments irrespective of their nature (whether capital or revenue) and whether they pertain to past, current and future periods are to be shown on its credit side is step ____ in preparation of Receipt and Payment Account.

book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

  1. 1

  2. 2

  3. 3

  4. 4

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Correct Option: C
Explanation:

The third step in preparation of Receipt and Payment account is showing the total amounts of all payments on credit side whether of capital or revenue nature and whether pertaining to past, current and future periods.

________is/are example(s) of capital receipts.

book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

  1. Sale proceed of fixed asset

  2. Loan raised from financial institutions

  3. Capital raised through book building process

  4. All of the above

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Correct Option: D
Explanation:

b'Option D is correct. Capital receipts refer to those receipts which either create a liability or cause a reduction in the assets of the firm. They are non-recurring or non-routine in nature. Sale proceeds of fixed assets leads to reduction in assets. Loan and Capital raised create liability for firm. All are capital receipts. '