Question

Select the most appropriate answers from the alternatives given below and rewrite the sentences.

An Income and Expenditure Account and a Balance sheet is prepared as final accounts by a ______________ .
a) ‘Not for Profit’ Concern
b) Trading Concern
c) Commercial Organisation
d) Public Limited Company

Answer 1

An Income and Expenditure Account and a Balance sheet is prepared as final accounts by a Not for Profit Concern.

Explanation: Certain organisations are formed not to earn profits but to render services to their members or to society at large. For example, schools, clubs, hospitals etc. The primary motive of such organisations is to provide service. At the end of the accounting year, non-profit organisations (NPO) prepare Income and Expenditure Account and Balance Sheet to ascertain the financial performance (i.e. surplus or deficit) and the financial position.

In case of profit seeking entities, i.e. commercial organisations, public limited companies or trading concerns, Profit and Loss Account is prepared to ascertain the profit earned or loss incurred during the year and Balance Sheet is prepared to know the financial position of the business.