Identify the salient features of the Income and Expenditure account from the following:

A. It is prepared on an accrual basis.
B. It includes both revenue as well as capital items.
C. It is prepared after taking into account the additional information regarding outstanding prepaid expenses and depreciation etc.
D. Its result is surplus or deficit.
E. It is prepared with the help of Receipts and Payments Account

Choose the correct answer from the options given below:

A, C, D and E only

The correct answer is option 4- A, C, D and E only. 

A. It is prepared on an accrual basis- This is true.

B. It includes both revenue as well as capital items- This is false as only revenue items are included in income and expenditure account.

C. It is prepared after taking into account the additional information regarding outstanding prepaid expenses and depreciation etc.- - This is true.

D. Its result is surplus or deficit- This is true.

E. It is prepared with the help of Receipts and Payments Account-- This is true.

Income and expenditure account 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. The Income and Expenditure Account serves the same purpose as the profit and loss account of a business organisation does. All the revenue items relating to the current period are shown in this account, the expenses and losses on the expenditure side and incomes and gains on the income side of the account. It shows the net operating result in the form of surplus (i.e. excess of income over expenditure) or deficit (i.e. excess of expenditure over income), which is transferred to the capital fund shown in the balance sheet. The Income and Expenditure Account is prepared on accrual basis with the help of Receipts and Payments Account along with additional information regarding outstanding and prepaid expenses and depreciation etc. Hence, many items appearing in the Receipts and Payments need to be adjusted.