Explanation:

The correct answer is option 'D' - Adjustments relating to prepaid and outstanding expenses etc. are made.

Income and Expenditure Account:
The Income and Expenditure Account is a nominal account prepared by non-profit organizations to determine their surplus or deficit for a particular accounting period. It records all the revenue and expenses incurred during the period, whether they are in cash or not.

Adjustments:
Adjustments are made in the Income and Expenditure Account to ensure that all expenses and incomes for the relevant accounting period are correctly accounted for. Some common adjustments include:

1. Prepaid Expenses: Prepaid expenses are expenses that have been paid in advance but have not yet been incurred. For example, if rent for the entire year is paid in advance, only a portion of it will be considered as an expense for the current accounting period. The remaining amount will be treated as a prepaid expense and deducted from the total rent paid.

2. Outstanding Expenses: Outstanding expenses are expenses that have been incurred but not yet paid. For example, if salaries for the current accounting period are unpaid at the end of the period, they will be considered as outstanding expenses and added to the total salary expense.

3. Accrued Income: Accrued income is income that has been earned but not yet received. For example, if interest on investments is earned but not received by the end of the accounting period, it will be considered as accrued income and added to the total income in the Income and Expenditure Account.

4. Unearned Income: Unearned income is income that has been received in advance but is not yet earned. For example, if membership fees are received in advance for the next accounting period, only a portion of it will be considered as income for the current accounting period. The remaining amount will be treated as unearned income and deducted from the total membership fees.

Importance of Adjustments:
Adjustments are important in the Income and Expenditure Account because they ensure that the financial statements reflect the true financial position of the organization. By making adjustments for prepaid and outstanding expenses, the account accurately represents the expenses for the relevant accounting period. Similarly, adjustments for accrued and unearned income ensure that the income is recognized in the appropriate accounting period.

Conclusion:
In conclusion, option 'D' - Adjustments relating to prepaid and outstanding expenses etc. are made, is the correct answer because adjustments are an essential part of preparing the Income and Expenditure Account. They ensure that the account accurately reflects the revenue and expenses for the relevant accounting period.