Which of the following statement is correct?

Both 1 and 2 are correct.

The correct answer is option 3- Both 1 and 2 are correct.

The balance of Receipts and Payments account is carried forward to the next year. THIS IS TRUE. The balance of Receipts and Payments account ( cash at hand or bank) is carried forward to the next year as the next year opening balance.

The balance of Income and Expenditure account is not carried to next year. THIS IS TRUE. The balance of Income and Expenditure account (surplus or deficit) is not carried to next year. It (surplus) is added to the capital fund or deficit is deducted from the capital fund in the balance sheet.