Receipt and Payment account

The Receipt and Payment account is a summarised form of presenting the receipts and payments made by a non-trading concern or a non-profit organisation. It is simply a synopsis of the cash and bank transactions. It is prepared on the basis of the cash receipts earned and cash payments incurred as are recorded in the cash book.

With the help of this account and some more information, a non-profit organisation prepares its Income and Expenditure account.




Characteristics of Receipt and Payment account –  

The following are its features:

  1. Period of transaction recorded –This account is prepared at the end of the accounting year and records all cash and bank transactions effected during the current year, irrespective of whether they are related to the current, past or future accounting periods.
  2. Summarised Record – It presents a summarised picture of a Cash Book under heads like subscription received from the members, donations received, entrance fees, general expenses etc.
  3. No application of Double Entry system – This account is basically a summary of Cash Book and therefore the double entry bookkeeping system does not apply.
  4. Omission of Non-cash expenses – Receipt and Payment account does not take into account non-cash expenses like depreciation, amortisation, outstanding expenses, accrued income etc.
  5. Nature of Transactions – The transactions of both revenue and capital nature are incorporated in this account.
  6. Debit/Credit Side – The debit side of this account represents the cash receipts earned and the credit side represents the cash payments incurred.
  7. Opening Balance – The opening balance of Receipt and Payment account presents cash or bank balance available at the beginning of the year or a bank overdraft.
  8. Closing Balance – The closing balance of Receipt and Payment account would either show cash or bank balance remaining with the organisation or a bank overdraft at the end of the accounting year.
  9. Legal requirement – The non-profit organisation is required to submit this account along with the Balance Sheet and Income and expenditure account to the Registrar of Societies.




Advantages –

The following are the its benefits:

  1. Information at a glance – It helps in a quick analysis of the total receipts and total payments under different heads.
  2. Ascertaining closing balance – The cash position of an organisation at the end of the year can easily be understood.
  3. Verification of cash book – The accuracy and correctness of cash book can easily be established as the total of debit side and credit side of cash book would reconcile with the receipt side and payment side of this account respectively.
  4. Aid for preparing Income and Expenditure account – The data from Receipt and Payment account help in preparing the Income and Expenditure Account.

Therefore, the debit side of Receipt and Payment account indicates the transactions from where cash is received and the credit side indicates the transactions on which expenditure is incurred. It highlights the cash position of an organisation at the year end.

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