Steps in the preparation of Income and Expenditure account are: (A) T…

Steps in the preparation of Income and Expenditure account are:

(A) Take revenue receipts to the credit side and revenue expenses to the debit side of Income and Expenditure A/c
(B) Persue Receipt and Payment Account thoroughly
(C) Exclude the capital receipts and capital payments
(D) Close the account to find surplus or deficit

Choose the correct answer from the options given below.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (B), (C), (A), (D)

An Income and Expenditure Account is built out of the Receipt and Payment Account by keeping only the revenue items of the year:

(B) Peruse the Receipt and Payment Account thoroughly – first understand every receipt and payment.

(C) Exclude the capital receipts and capital payments – they belong to the Balance Sheet (the opening and closing cash and bank balances are left out too).

(A) Take revenue receipts to the credit side and revenue expenses to the debit side, adjusted for amounts outstanding and received or paid in advance.

(D) Close the account – the balance is the surplus (excess of income over expenditure) or the deficit.

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):
Steps in the Preparation of Income and Expenditure Account – “Following steps may be helpful in preparing an Income and Expenditure Account from a given Receipt and Payment Account: 1. Persue the Receipt and Payment Account thoroughly. 2. Exclude the opening and closing balances of cash and bank as they are not an income. 3. Exclude the capital receipts and capital payments as these are to be shown in the Balance Sheet. 4. Consider only the revenue receipts to be shown on the income side of Income and Expenditure Account. Some of these need to be adjusted by excluding the amounts relating to the preceding and the succeeding periods and including the amounts relating to the current year not yet received. 5. Take the revenue expenses to the expenditure side of the Income and Expenditure Account with due adjustments as per the additional information provided relating to the amounts received in advance and those not yet received.”