Tag: book keeping and accountancy

Legacy is the property received by virtue of a will of a person or after his death. Its a capital receipt and hence would not appear in income and expenditure account and will be added to the capital in Balance sheet.  

b'Option C is correct. A Receipt and Payment account is simply a summary of the cash transactions as in the cash book, including opening and closing balances. All cash receipts and cash payments find place in this account whether they are of revenue nature or capital nature. '

Receipt and payments account is a real account just like cash account. Its prepared at the end of the year. All receipts are recorded on the debit side and expenses on the credit side. Its basically a summary of cash book, it records cash expenses and incomes of all nature and is prepared on cash basis. It follows the rule of a real account, debit what comes and credit what goes out. The receipts are credited and the payments are debited. 

Legacy is generally shown on the debit side of receipts and payments accounts. Legacy is the property received by virtue of a will of a person or after his death. Its a capital receipt and hence would not appear in income and expenditure account and will be added to the capital in Balance sheet. It should be capitalised being an item of non-recurring nature. 

Receipt and payment account records all cash receipts and cash payments during the year whether related to current year, previous year or future year. It records both capital and revenue nature receipts and payments. Depreciation being non-cash item is not recorded in this account. Outstanding subscription received and prepaid insurance Premium being cash items are recorded in this account.

Option A is correct. Nominal account is related to expenses or losses and incomes or gains. Income and Expenditure account is an account prepared by non trading concerns to ascertain surplus or deficit of income over expenditure for a particular period. So Income and Expenditure account is a Nominal account.

Income and expenditure account is a nominal account and is just like a profit and loss account. All the expenses are recorded on the debit and side and incomes on the credit side. It records all incomes and expenses on accrual basis which means as and when its realised or incurred. Hence items related with the current period are to be recorded only. 

Surplus is the excess of income over expenditure. A credit balance in the Income and expenditure account shows surplus. It is the profit earned and should be added to the capital fund on the liabilities side of the balance sheet. 

Rent a/c records the various entries regarding rent like advance payment, outstanding rent. 

Subscription amount that has to be credited in the income & expenditure account is calculated after adjusting the various subscription amounts.