Which of the following is revealed by income and expenditure account?

Surplus or deficit

The correct answer is option 2- Surplus or deficit.

The income and expenditure account will result in either surplus, i.e., when income is higher than expenditure, or deficiency, i.e., when income is lower than expenditure.

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.

OTHER OPTIONS

• Cash in hand- It is the starting point while making receipts and payment account. It shows the cash balance with the organisation.

• Net profit- It is calculated by preparing profit and loss account by business organisation.

• General fund- It is another name for the capital fund. It is shown in the balance sheet. Any surplus of the income and expenditure account is added to it or any deficit is deducted.