Tag: book keeping and accountancy

Sale of scraps is a routine activity which generates indirect income for any entity whose sole objective is not to deal in scraps. Hence, amount received from sale of scraps by a charitable hospital is treated as an income and booked in the income and expenditure account.

Option A is correct. Legacy is the amount which a not for profit organisation receive as per the will of a deceased person. As this is a receipt it is recorded on debit side of Receipts and Payments A/c. 

Excess of revenue income over revenue expenditure is not a loss rather it is net income. Net income is one of the key indicators of company profitability, along with gross margin and before tax income. For example - revenue of ₹ 10,00,000 and expenses of ₹900,000 yield net income of ₹100,000. In this example, if the amount of expenses had been higher than revenues, the result would have been termed a net loss rather than a net income. 

Interest on Investment is an income of business concern. Investment is purchasing of an asset with the goal of generating income. Likewise interest in investment will be recorded as an income. 

Rent paid is an expense for the business. Expense is a nominal account. Rule of nominal account says that all the expenses and losses should be debited. hence Rent paid is to be debited to Rent A/c.

Revenue receipts are those receipts that are received in the conduct of ordinary and day-to-day business activities. for e.g. receipts from sale of goods and services are the main source of revenue receipts. 

Option A is correct. Income includes both revenues and gains. Capital refers to amount invested in the business. It is not inflow of benefits. It is the amount invested by the owner in business. Assets refers to things which have future economic value and bank overdraft is the amount withdrawn in excess of the amount deposited in bank. So, inflow of economic benefits is referred to as Income. 

b'At the time of retirement or death of a partner, the books of accounts of firm have to be settled. The outgoing partner or his legal representatives have to be paid their dues. For calculation of correct amount to be paid, it is important that all assets and liabilities must be recorded at their current values and if there is any unrecorded assets and liabilities that should also be recorded. For this. a revaluation account is opened. A revaluation account is prepared to ascertain net profit or loss on revaluation of assets and liabilities and bringing unrecorded items into books. '

Option D is correct. Receipts and payments Account is prepared on cash basis of accounting. It is a summarized cash book. All the cash receipts during the whole year is recorded on debit side. All the cash payments during the whole year is recorded on credit side. incomes or expenses that do not involve the inflow of cash are not recorded in this account.