accountingexplanation.com

Home page                    Download material                     Accounting topics                     Accounting dictionary                     Financial calculators

Home Accounts of Non-profit Making Organizations Receipt and Payment Account
 
 

Receipt and Payment Account:

Definition and Explanation:

"A receipt and payment account is a summarized cash book (cash and bank) for a given period".

or

"This is simply a summary of the cash transactions as in the cash book, analyzed and classified under suitable headings, including the opening and closing balances".

Non-profit organizations (also called non-trading concerns) prepare a receipt and payment account at the end of year. With the help of this account and some additional information, an income and expenditure account is prepared to disclose the true results of non-profit organizations. Receipt and payment account cannot disclose the true result of non-trading concern.

All the information necessary for the preparation of this account is available from cash book. Various cash receipts and cash payments during the whole year find place in this account in a classified manner. Its closing balance indicates cash in hand and cash at bank at the year end.

Characteristics of Receipt and Payment Account:

Following are the features of receipt and payment account:

  1. It is abridged addition of cash book - it is, in effect, a summary of cash book.

  2. All cash receipts during the whole year are recorded on its left hand (i.e., debit) side. While all the cash payments during the whole year written on its right hand (i.e., credit) side, arranged in a classified form.

  3. Cash receipts and cash payments of both capital and revenue nature are recorded here.

  4. Only cash transactions are recorded in this account.

  5. It generally shows a debit balance. In case of bank overdraft balance, however, its net balance may be credit. Again, it may also show nil balance but such occasion is rare.

  6. Its closing balance indicates closing cash in hand and closing cash at bank.

  7. It is not an account within the double entry system - it is a statement only.

  8. It is prepared on the last day of the accounting year.

Advantages:

The following are the advantages of receipt and payment account:

  1. Total receipts and total payments under various heads are available at a glance.

  2. The amount of cash in hand at the year end can be ascertained.

  3. The correctness of cash book can be verified through it. The total of debit side of cash book will agree with the total of receipt side of this account. On the other hand, the total of credit side of cash book will agree with that of payment of this account.

Method of Preparation:

Receipts and payment account is prepared with all the cash receipts and cash payments of the whole year. The net result of cash receipts and cash payments of a fixed time is determined through this account. So it is its heading will be:

Receipt and Payment Account
For the Year Ended 31.12.2005

Its left hand side is called "Receipts" and right hand side "payments". On the left hand side all cash receipts are recorded, while on the right hand side all cash payments are recorded arranged in a classified form. It starts with last year's closing cash in hand and cash at bank and closes with current year's closing cash in hand and cash at bank. In other words, its opening balance indicates last year's closing cash in hand and cash at bank, while its closing balance means current year's closing cash in hand and cash at bank.

Example:

From the following cash book prepare receipts and payments account for the year ended 31 December 2005.

Cash Book

Date References L/R Amount Date References L/R Amount
2005       2005      
Jan. 1 Balance b/d   250 Jan. 5 Rent   200
Feb. 2 Subscription   600 Jan. 16 Traveling expenses   15
Mar. 10 Admission fee   25 Fed. 12 Salaries   250
Apr. 5 Subscription   950 Mar. 17 Entertainment expenses   50
May 20 Sale of old newspapers   10 Apr. 20 Electric charges   20
June 3 Subscription   880 May 5 Furniture   300
July 15 Admission fee   30 May 10 Postage   18
Aug. 20 Sale of old newspaper   15 June 3 Stationary   120
Sep. 5 Donation   100 July 12 Electric charges   30
Oct. 1 Sale of old furniture   150 Aug. 3 Newspaper   25
Nov. 15 Donation   50 Sep. 15 Salaries   320
Dec. 28 Subscription   250 Sep. 20 Newspaper   65
        Oct. 3 Traveling expenses   25
        Oct. 12 Postage   12
        Nov. 5 Rent   300
        Nov. 16 Entertainment expenses   80
        Dec. 5 Books   450
        Dec. 12 Salaries   350
        Dec. 25 Rent   130
        Dec. 31 Balance c/d   550
     
     
      3,310       3,310
     
     
2006              
Jan. 1     550        

Solution:

ABC Club
Receipt and Payment Account
For the year ended 31st December, 2005

Receipts $ Payments $
Balance b/d 250 Rent [200+300+130] 630
Subscription [600+950+880+250] 2,680 Traveling expenses [15+25] 40
Admission fee [25+30] 55 Salaries [250+320+350] 920
Sale of old newspaper [10+15] 25 Entertainment expenses [50+80] 130
Donation [100+50] 150 Electric charges [20+30] 50
Sale of old furniture 150 Furniture [200+300+130] 300
    Postage [18+12] 30
    Stationary 120
    Newspaper [25+65] 90
    Books 450
    Balance c/d 550
 
 
  3,310   3,310
 
 
Balance b/d 550    

 

 

 

 

           Like this site? Share it with your friends


 
 

Financial Accounting Topics


  Introduction to Accounting
 ----------------------------------------------------------------------------
  Transactions and Accounting Equation
----------------------------------------------------------------------------
  Analysis of Business Transactions
----------------------------------------------------------------------------
  Journal, Ledger and Trial Balance
----------------------------------------------------------------------------
  Accounting for Bills of Exchange
----------------------------------------------------------------------------
  Special Journals
----------------------------------------------------------------------------
  Cash Book
----------------------------------------------------------------------------
Bank Reconciliation Statement
----------------------------------------------------------------------------
  Final Accounts
----------------------------------------------------------------------------
  Work Sheet
----------------------------------------------------------------------------
  Capital and Revenue Items
----------------------------------------------------------------------------
  Valuation of Inventories
----------------------------------------------------------------------------
  Accounts of Non-profit Making Organizations
----------------------------------------------------------------------------
  Statement of Cash Flows
----------------------------------------------------------------------------
  Accounting Ratios Analysis
----------------------------------------------------------------------------
  Depreciation, Provisions and Reserves
----------------------------------------------------------------------------
  Accounting Dictionary
----------------------------------------------------------------------------
  Financial Calculators
 
 
 
Managerial Accounting Topics

  Financial Statements
----------------------------------------------------------------------------
  Cost Volume Profit Relationship
----------------------------------------------------------------------------
  Variable Costing System
----------------------------------------------------------------------------
  Materials and Inventory Cost Control
----------------------------------------------------------------------------
  Activity Based Costing System
----------------------------------------------------------------------------
  Standard Costing and Variance Analysis
----------------------------------------------------------------------------
  Balanced Scorecard
----------------------------------------------------------------------------
  Capital Investment Analysis/Capital Budgeting
 
 

ADVERTISEMENT

 

Home                         Download material                         Contact us                         Privacy policy                         Link to us                         Advertise

Copyright 2011