Question

Which of the following item/items will be included in income and expenditure account?
I. Accrued expenses
II. Credit purchases
III. Prepaid expenses
IV. Opening cash balance
Select the correct answer from the codes given and mark your answer sheet accordingly.

• A. I
• B. I and III
• C. II and III
• D. III and IV

Answer 1

The correct option is B I and III

An income and expenditure account unlike receipts and payments accounts records all and only the transactions that relate to the current year. In the given question only accrued expenses and prepaid expenses would be included.

I. Accrued expenses are the expenses that are incurred this year and not paid in the current year.

II. Credit purchases won't appear in the current year rather the material consumed in the current year would be calculated and added to the expenditure.

III. Prepaid expenses are the expenses which relate to this year but have been already paid.

IV. Opening cash balance is a balance and only transactions appear in the income and expenditure account. Opening cash balance will appear in opening balance sheet and Receipts and payments account.