Identifying True Accounting Statements

Let's analyze each statement given in the question to determine if it is true or false based on fundamental accounting principles.

Statement 1: Prepaid rent is a Personal A/c.

Prepaid rent represents an amount paid in advance for rent services that will be received in the future. In accounting, assets are things the business owns or controls that are expected to provide future economic benefits. Prepaid rent is an asset because it represents a service owed to the business. Accounts representing assets, liabilities, or equity are generally classified under Real Accounts (for assets and liabilities) or Capital (for equity). However, when an expense (like rent) is paid in advance, it is treated as a Prepaid Expense account. Prepaid expense accounts are classified as Representative Personal Accounts. This is because they represent the account of the person or entity to whom the payment was made but the service is yet to be received, or they represent the portion of the expense relating to the future period. Therefore, prepaid rent is indeed a Personal Account (specifically, a representative personal account).

Statement 1 is true.

Statement 2: Interest on Drawings is an income for the business.

Drawings are amounts of cash or goods withdrawn by the owner from the business for their personal use. When the business charges interest on these drawings, it is essentially earning revenue from the owner for the use of business funds. Income increases the profit of the business. Therefore, interest on drawings is considered an income or revenue for the business.

Statement 2 is true.

Statement 3: Accrued income and income due but not received are same.

Accrued income refers to income that has been earned during the current accounting period but has not yet been received in cash. It represents an asset for the business (accrued income receivable). Income due but not received carries the exact same meaning – income that was earned (thus due) but the payment has not been collected yet. These terms are often used interchangeably to describe revenue that has been recognized in the books but the cash inflow has not occurred by the end of the period.

Statement 3 is true.

Statement 4: Cost of obtaining licence to carry out business is a capital expenditure.

Expenditure is classified into capital expenditure and revenue expenditure. Revenue expenditures are incurred for the day-to-day running of the business or to maintain existing assets and provide benefits only for the current accounting period. Capital expenditures, on the other hand, are incurred to acquire assets or improve existing ones, providing benefits that extend over multiple accounting periods. A licence to carry out business allows the business to operate legally for a considerable duration (often years), contributing to the earning capacity of the business over the long term. Therefore, the cost incurred to obtain such a licence is treated as a capital expenditure.

Statement 4 is true.

Conclusion

Based on our analysis:

• Statement 1 is true.
• Statement 2 is true.
• Statement 3 is true.
• Statement 4 is true.

Since statements 1, 2, 3, and 4 are all true, there is more than one true statement among the given options.