JAMB Accounts Principles of Accounts 2016 Paper

Concept:The income and expenditure account is prepared on the accrual basis, whereas the receipts and payments account is prepared on a cash basis.Explanation:The receipts and payments account summarises only actual cash received and cash paid during the period.It treats all cash movements as they occur, irrespective of the period they belong to.The income and expenditure account, however, follows the accrual concept.It includes all incomes earned and expenses incurred for the period, whether or not cash has been received or paid.Outstanding expenses, prepaid expenses, accrued incomes and incomes received in advance are properly adjusted.Thus, the main difference is that the income and expenditure account records transactions relating to the period on an accrual basis.Answer:C. Records transactions that relate to the period on accrual basis.