GENERAL KNOWLEDGE

Detailed explanation-1: -Income and expenditure account is prepared on Accrual basis. Accrual basis of accounting is wherein all the expenses that are actually incurred and incomes actually earned are recorded.

Detailed explanation-2: -Income and Expenditure account is prepared on an accrual basis. While preparing the account, only items of revenue nature are recorded and all items of capital nature are ignored.

Detailed explanation-3: -Mercantile or accrual system. Accrual basis of accounting is also known as Mercantile basis of accounting. In this system, transactions are recorded when they arise. The incomes are recorded in the books of the accounts when it is earned, irrespective of the fact that it is received or accrued.

Detailed explanation-4: -Include all the incomes that are related to the current period but which are yet to be received. Include all expenditures for the current period which are not yet paid. Provisions for bad debts and depreciation on fixed assets should be charged to the income and expenditure account.

Detailed explanation-5: -An Income and Expenditure Account is the detailed summary of every income and expense incurred by an organization in a specific financial year. Prepared on an accrual basis, this account records every income and expense in a particular year, irrespective of whether they are clear or not.