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  1. This answer was edited.

    First, let me help you interpret the difference between Receipts & Income along with the help of an example. Difference between Income & Receipts  Income Receipts Income refers to the amount received by an entity from its core business operations and day to day functioning. Any cash inflow rRead more

    First, let me help you interpret the difference between Receipts & Income along with the help of an example.

    Difference between Income & Receipts 

    Income Receipts
    Income refers to the amount received by an entity from its core business operations and day to day functioning. Any cash inflow received by an entity can be termed as receipts.
    All incomes affect the statement of profit & loss. But all receipts do not affect profit & loss statement.
    Income includes only revenue receipts.

     

    Receipts include both capital receipts & revenue receipts.
    It can be cash or non-cash in nature. For eg. non-cash items such as an unrealized gain from investments, profit on revaluation of fixed assets are also considered as income. It is only cash in nature.

    Examples of Receipts & Income

    For instance, XYZ Inc. receives the following amount in the month of January 20×1. Let us differentiate the following transactions as receipts or income.

    1. Borrowed 50,000 from a bank for establishing a new unit.
    2. Amount of 10,000 received from the disposal of an old machine.
    3. Amount of 600,000 received from the issue of new shares & debentures of XYZ Inc.
    4. 500,000 received as consideration for the sale of goods or services.
    5. Rent received 60,000 from the tenant.
    6. Interest & Dividend received 15,000 from investments in Amazon Inc.

    All the above examples can be termed as receipts but all of them cannot be termed as income. Only examples 4, 5, & 6 can be referred to as income for XYZ Inc.

    Eg. 1, 2, & 3 are capital receipts and will not affect the statement of profit & loss of XYZ Inc. Therefore they are termed only as receipts & not income.

    Whereas eg. 4, 5, & 6 are revenue receipts and will affect the profit & loss statement. Therefore, they can be referred to as income for XYZ Inc.

    Now moving forward, let me help you understand the difference between payments & expenditure, with the help of an example.

    Difference between Payments & Expenditure

    Expenditure Payments
    Expenditure refers to the amount incurred by an entity for operating the business and for earning income. Any cash outflow incurred by an entity can be termed as payments.
    All expenses affect the statement of profit & loss. But all payments do not affect profit & loss statement.
    Expenditure includes only revenue expenditure.

     

    Payments include both capital expenditure & revenue expenditure.
    It can be cash or non-cash in nature. For eg. non-cash items such as depreciation, amortization, bad debts are also considered expenses. It is only cash in nature.

    Examples of Payments & Expenditure

    For instance, ABC Inc. incurs the following payments in the month of January 20×1. Let us differentiate these transactions as payments or expenditures.

    1. Paid 40,000 for the acquisition of new machinery.
    2. Paid 200,000 for the redemption of shares and debentures issued by ABC Inc.
    3. Repaid 45,000 amount of loan taken from the financial institution.
    4. Salary & Wages paid 100,000.
    5. Purchase of Raw materials 30,000.
    6. Professional fees paid 15,000.

    All the above examples can be referred to as payments by ABC Inc. but all of them cannot be termed as expenditures. Only examples 4, 5, & 6 can be referred to as expenditures for ABC Inc.

    Eg. 1, 2, & 3 are capital expenditures and will not affect the statement of profit & loss of ABC Inc. Therefore they are termed only as payments and not expenditures.

    Whereas eg. 4, 5, & 6 are revenue expenditures and will affect the profit & loss statement. Therefore, they can be referred to as expenditure for ABC Inc.

    Conclusion

    1. All cash incomes are receipts. But all cash receipts are not income.
    2. All cash expenditures are payments. But all cash payments are not expenditure.

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  1. This answer was edited.

    Balance of Petty Cash Book- The balance of petty cash book is an asset and not income. The logic behind the answer is that petty cash book is one of the types of cash book and petty cash book records expenses and incomes which is similar to cash book. Since cash account is considered as an Asset, peRead more

    Balance of Petty Cash Book-

    The balance of petty cash book is an asset and not income. The logic behind the answer is that petty cash book is one of the types of cash book and petty cash book records expenses and incomes which is similar to cash book. Since cash account is considered as an Asset, petty cash book which is a part of cash book is also an asset.

    The balance of petty cash book is never closed and their balances are carried forward to the next accounting period which is considered as one of the most significant qualities of an asset whereas Income doesn’t have any opening balance and their balances get closed at the end of every accounting year.

    Petty cash book is placed under the head current asset in the balance sheet. The Closing Balance of petty cash book is computed by deducting Total expenditure from Total cash receipt (as received from the head cashier).

    To make the above explanation and logic easy. I would like to add a practical example for clear understanding.

    Example Problem

    Prepare Petty Cash Book of Alex & Max Co. from the following information as provided below

    Date  Particulars Amount
    1st Aug Received cash from head cashier 5,000
    4th Aug Paid Cartage expenses 300
    8th Aug Telephone charges paid 200
    10th Aug Paid Sundry expenses 500

      Petty Cash Book of Alex & Max Co.

    Petty Cash Book

    Conclusion

    I would like to conclude my answer by stating that the balance of petty cash book is an asset and not income.

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  1. Is Income debit or credit? Income is credited. Now, let me help you understand why and how is income credited & not debited. Why and How is Income credited? The account of expenses, losses, incomes, and gains are called as Nominal accounts. So, to ascertain the treatment of income, we need to knRead more

    Is Income debit or credit?

    Income is credited.

    Now, let me help you understand why and how is income credited & not debited.

    Why and How is Income credited?

    The account of expenses, losses, incomes, and gains are called as Nominal accounts. So, to ascertain the treatment of income, we need to know both the Golden rules and Modern rules of accounting for nominal accounts.

    1. Golden rules

    First, we will interpret why income is credited correlating it with the golden rules of nominal account along with an example. Golden rules state-

    Debit all Expenses and Losses & Credit all Incomes and Gains

    This is the reason why income is always to be credited.

    Example

    Professional fees charged by Deloitte Inc. for executing an audit of Pepsico Inc. 10,00,000.

    The journal entry for this transaction in the books of Deloitte Inc. will be-

    Pepsico Inc. A/c Debit 10,00,000 Personal A/c Debit the receiver of service
     To Professional fees A/c Credit  10,00,000 Nominal A/c Credit all incomes and gains

    The above journal entry shows that professional fees is the income for Deloitte Inc. Therefore, it has been credited.

    2. Modern rules

    Now, we will ascertain the reason why income is credited correlating it with the modern rules with the help of an example.

    Modern rules of accounting states-

    Credit the increase in Income

    Example

    Mr. Charles received rent 60,000 in cash from its tenant.

    The journal entry for this transaction in the books of Mr.Charles will be-

    Cash A/c Debit 60,000 Debit the increase in asset
     To Rent received A/c Credit  60,000 Credit the increase in income

    The above entry shows an increase in the income of Mr. Charles by receiving rent from its tenant.

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