Which of the following will be included in preparing an Income and Ex…

Which of the following will be included in preparing an Income and Expenditure Account?

A. Opening and Closing balances of Cash and Bank

B. Amount of revenue received in advance

C. Loss on sale of Asset

D. Purchase of Books

E. Depreciation of Fixed Asset

Choose the correct answer from the options given below.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → C and E only

The Income and Expenditure Account takes only the revenue items of the current year.

(A) Opening and Closing balances of Cash and Bank – excluded; they are not income.

(B) Amount of revenue received in advance – excluded; it belongs to the next year and is shown as a liability.

(C) Loss on sale of Asset – included on the expenditure side.

(D) Purchase of Books – excluded; it is a capital payment shown in the Balance Sheet.

(E) Depreciation of Fixed Asset – included on the expenditure side, though it never appears in the Receipts and Payments Account.

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. 6. Consider the following items not appearing in the Receipt and Payment Account that need to be taken into account for determining the surplus/ deficit for the current year : (a) Depreciation of fixed assets. (b) Provision for doubtful debts, if required. (c) Profit or loss on sale of fixed assets.”