Question

Which of the following items should be entered in the Income and Expenditure Account of a club ?
1.Purchase of debentures of a company.
2.Subscriptions received in advance.
3.Sale price of old furniture.
4.Large amount of donation received from a company.
Select the correct answer from the codes given below :

• A. 2 and 4
• B. 1 , 2 and 3
• C. All the items
• D. None of the items

Answer 1

The correct option is D None of the items

The income and expenditure account records the incomes earned and expenditures incurred, which are of revenue nature and not capital nature, for a period.

1. Purchase of debentures of a company is not a revenue expense, hence will not be recorded in the income and expenditure account.

2. Subscriptions received in advance is a current liability for the club which should be adjusted with the subscriptions received for the period.

3. Sale price of old furniture is the amount by which the asset has reduced. Thus, it will not be included in the income and expenditure account. The profit earned or loss incurred on the other hand, should be included.

4. Large amount of donation received from a company may be for a specific purpose, and hence not booked as income in the income and expenditure account.

Thus, none of the items should be entered in the income and expenditure account of a club.