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WAEC Financial Accounting 1991 (August) Question 40

Question 40

Not-for-Profit Organisations

Which of the following statements is not true of a non-profit making organization?

  1. A.Income and Expenditure account is prepared
  2. B.Income and Expenditure account includes accruals and prepayments
  3. C.Income and Expenditure account excludes capital receipts and capital payments
  4. D.Receipts and Payments account deals with cash transactions only
  5. E.Receipts and Payments account is a substitute for Income and Expenditure account
Show the answer and explanation

Answer: E (Receipts and Payments account is a substitute for Income and Expenditure account)

Explanation

A receipts and payments account is only a cash summary; it cannot replace the income and expenditure account.