Concept:In a not-for-profit organization, the excess of income over expenditure is recorded as a surplus.
This surplus increases the accumulated fund, which is the organization’s capital equivalent.
Explanation:The Income and Expenditure Account is prepared like a profit and loss account.
When total income is greater than total expenditure, the result is a surplus.
A surplus represents a gain from operating activities during the period.
In not-for-profit organizations, such gains are not distributed to owners.
Instead, they are transferred to the accumulated fund on the balance sheet.
This transfer increases the net assets of the organization.
Therefore, the excess of income over expenditure should be added to the accumulated fund.
It should never be deducted from capital or from the accumulated fund, nor added to capital as a separate item.
Answer:B. added to the accumulated fund