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CSEET · Fundamentals of Accounting · Accounting for Non-Profit Organizations

Non-profit organizations normally prepare an Income and Expenditure Account instead of a Profit and Loss Account. What does this account primarily show?

The Income and Expenditure Account shows the surplus or deficit for the year on an accrual basis, with only revenue incomes and expenses of the current period. It is not a cash summary; that role belongs to the Receipts and Payments Account.

  1. ACash receipts and cash payments of the year
  2. BSurplus or deficit of the year on accrual basis, covering only revenue items of the current periodCorrect
  3. CAssets and liabilities at the year end
  4. DCapital receipts and capital expenditure of the year

Explanation

The Income and Expenditure Account is like a nominal account prepared on the accrual basis. It records revenue incomes and expenses of the current year and shows surplus or deficit. Option A describes the Receipts and Payments Account, and C describes the Balance Sheet.

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