CONTENT :

1. Meaning of Receipts and Payments Account.
2. Features of Receipts and Payments Account.
3. Advantages and Disadvantages of Receipts and Payments Account. 
4. Limitations of Receipts and Payments Account. 
5. Specimen of Receipts and Payments Account. 

What is Receipts and Payments Account ?

Meaning :

The day to day transactions of a ' Not for Profit ' concern are recorded in cash book and then posted to ledger account. At the end of the financial period the cash book and ledger account are balanced and from these balances, Receipts and Payments Account is prepared. 
Thus Receipts and Payments Account is a summary of cash transactions and bank transactions for a particular period, Receipts and Payments Account is a similar to cash book in it's form, having receipts to the left hand side and payments to the right hand side. Credit transactions are not recorded in Receipts and Payments Account. Most of the transaction of ' Not for Profit ' concerns are cash transactions.
Receipts and Payments Account is a Real Account. Therefore, all receipts are shown to the debit side and all payments to the credit side of the account. This account starts with cash balance and bank balance at the beginning of the particular period and closes with cash balance and bank balance, at the end of the particular period. 

Receipts :

All receipts during a particular period, are debited to Receipts and Payments Account irrespective of the year for which they are received and irrespective of their nature - revenue or capital. Such receipts may be related to previous year or current year or next year. Similarly such receipts may be revenue receipts or capital receipts. All are debited to this account. 
e. g.  Total subcription received during the year 01-04-2009 to 31-03-2010, is rs. 53,500 out of which subcription, for previous year i. e. 2008-09 is Rs. 1,500 for current year i. e. 2009-10 is Rs. 50,000 and for next year i. e.  2010-11 is Rs. 2,000.
As the amount of subscription was received during the year 2009-10, it is shown to the receipts side of Receipts and Payments Account of 2009-10, through the amount received is related to previous year, current year and next year. 

Payments :

All payments made during a particular period are credited to Receipts and Payments Account irrespective of the period to which it relates and irrespective of their nature - revenue or capital. Such payment may be related to previous year or current year or next year similarly such payments may be for revenue expenditure or for capital expenditure. All are credited to this account.
e. g.  Total rent paid during the year 01-04-2009 to 31-03-2010 is rs. 14,000 out of which rent, paid for current year i. e. 2009-10 is rs. 12,000 and paid for next year i.e. 2010-11 is rs. 2,000.
As the amount of rent was paid during the year 2009-10, it is credited to Receipts and Payments Account of the year 2009-10, through the amount paid is related to current year and next year. 

What are the Features of Receipts and Payments Account ?
  • Features of Receipts and Payments Account :

1. Receipts and Payments Account is a Real Account. 

2. Receipts and Payments Account is similar to cash book, in the sense that it gives us a summary of cash transactions and bank transactions .

3. It includes all types of receipt and payment whether they are the items of revenue nature or capital nature. 

4. It records all receipts and all payments during a particular period which may be related to past, current and next year.

5. Receipts and Payments Account records only actual receipts and actual payment during a particular period. It does not record any receivable amount or any payable amount. 

6. From Receipts and Payments Account, final accounts of ' Not for Profit ' concern are prepared. 

7. Receipts and Payments Account shows cash in hand, cash at bank in the beginning of the period and at the end of the period.

What are the Advantages and Disadvantages of Receipts and Payments Account ?

  • Advantages of Receipt and Payment Account :

1. Proper Recording Of Cash Transactions.
2. Provides Summary.
3. Verification Of Cash Book. 


  • Disadvantages of Receipt and Payment Account :

1. No Disclosure Of Profitability.
2. No Accrual Basis. 
3. No Non-cash Transactions.
4. No Surplus Or Deficiency.

What are the Limitations of Receipts and Payments Account ?
  • Limitations of receipts and payments account :

1. It does not differentiate between capital and revenue receipts and payments.

2. It does not provide an actual financial position of an organization.

3. It ignores accrual system of accounting.


The following specimen will help to understand the nature of Receipts and Payments Account and the items covered in Receipts and Payments Account :


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