Identify the salient features of the Income and Expenditure account f…

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:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → A, C, D and E only

The Income and Expenditure Account is the profit and loss account of a not-for-profit organisation:

(A) It is prepared on an accrual basis. — True. Income and expenses of the year are taken, received or not.
(B) It includes both revenue as well as capital items. — False. It includes only revenue items; capital items go to the balance sheet.
(C) It is prepared after taking into account the additional information regarding outstanding prepaid expenses and depreciation etc. — True. These adjustments turn cash figures into figures of the year.
(D) Its result is surplus or deficit. — True. The balance is a surplus or a deficit, not a profit or loss.
(E) It is prepared with the help of Receipts and Payments Account — True. The receipts and payments are the starting figures.

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):
Income and Expenditure Account – “… 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.”