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Question
Explain the term deficit in Income and Expenditure Account.
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Solution
- Deficit in the context of an Income and Expenditure Account refers to the excess of expenditure over income within a specific accounting period.
- When a non-trading organization incurs more expenses than it earns in revenue during a given period, the result is a deficit.
- The deficit is deducted from the organization's capital fund to indicate poor financial performance throughout the period.
RELATED QUESTIONS
Income and Expenditure Account is a ______ account.
State any three points of difference between ‘Receipts and Payment Account’ and ‘Income and Expenditure Account’.
It is a summary of all incomes and expenses of the current accounting year. It is prepared to know the surplus or deficit during the accounting year.
This account is equivalent to the Profit and Loss Account of a business concern.
It serves as the basis for preparing the Balance Sheet of a non-trading organisation.
Explain the term surplus in Income and Expenditure Account.
All donations received by non-trading concerns are entered in the liabilities side of the balance sheet. Justify either for or against.
What is Income and Expenditure Account?
Mention any two features of the Income and Expenditure Account.
Distinguish between Receipt and Income.
