The incorrect option is At the end of the period, the income and expenditure account balances are transferred to receipts and payments accounts. In the receipts and payments account, both capital and revenue receipts and payments are recorded. So, option 2 is contextually correct. Since the receipts and payments account is nothing but a cashbook without a date column, its balance denotes the difference between the cash received and the amount paid. So, option 3 is also contextually correct. Income and expenses, in the case of not for profit organization, is prepared the same way as to profit and loss accounts in a firm. The expenses are debited and incomes are credited. Therefore, option 4 is also contextually correct. At the end of the period, the income and expenditure account balances are transferred to the Balance sheet and not in receipts and payments. Therefore, option 1 is incorrect.