From the following statements, select the ones which relate to Income…

From the following statements, select the ones which relate to Income and Expenditure A/c.

(A) Provides opening and closing cash balances
(B) Prepared on accrual basis of accounting
(C) Records incomes of revenue nature only
(D) Records expenditures of revenue as well as capital nature
(E) Records non cash transactions such as depreciation

Choose the correct answer from the options given below.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (B), (C) and (E) only

The Income and Expenditure Account of a not-for-profit organisation is like a profit and loss account: it is prepared on the accrual basis, takes only revenue items of the current year and ends in a surplus or deficit. The Receipt and Payment Account, by contrast, is a cash summary.

(A) Provides opening and closing cash balances — False. Opening and closing cash and bank balances appear in the Receipt and Payment Account.

(B) Prepared on accrual basis of accounting — True. Incomes and expenses of the year are included whether received or paid or not.

(C) Records incomes of revenue nature only — True. Capital receipts go to the Balance Sheet.

(D) Records expenditures of revenue as well as capital nature — False. Capital expenditure is shown in the Balance Sheet; only revenue expenditure is recorded here.

(E) Records non cash transactions such as depreciation — True. Depreciation is an expense of the year though no cash is paid for it.

Note: This question is from the pre-rationalised NCERT book. The topic is not there in the latest NCERT book (2026-27), but it is still in the CUET 2026 syllabus, so do not skip it.

NCERT (Pre-rationalised edition):
Income and Expenditure Account – “It is the summary of income and expenditure for the accounting year. It is just like a profit and loss account prepared on accrual basis in case of the business organisations. It includes only revenue items and the balance at the end represents surplus or deficit.”

NCERT (Pre-rationalised edition):
Receipt and Payment Account – “… 6. It begins with opening balance of cash in hand and cash at bank (or bank overdraft) and closes with the year end balance of cash in hand/ cash at bank or bank overdraft.”

NCERT (Pre-rationalised edition):
Summary – “… 4. Difference between the Receipt and Payment Account and the Income and Expenditure Account: Many differences exist between the Receipt and Payment Account and the Income and Expenditure Account which is evident from the nature and purpose of two statements. While the former records both capital and revenue receipts and payments relating to any accounting year, the latter records only revenue items relating to the current accounting year. Non-cash expenses such as depreciation on fixed assets and outstanding incomes and expenses are shown in the latter but omitted in the former.”