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Receipts and Payments Account

Receipts and Payments Account?
Or

What is Receipts and Payments Account?

Receipts and payments account is the summary of cash and bank transactions during an accounting period, analyzed and classified under suitable headings.
Or
Receipts and payments account is a real account showing summary of all cash and bank transactions during an accounting period. It is prepared at the end of the accounting year.
Key Points:
* All cash receipts and payments are recorded in this account whether these belong to the current year or next year or previous year.

* All receipts and payments are recorded in this account whether these are of revenue nature or capital nature.

* As it is an account so it has the debit side and the credit side.

* All receipts are recorded on its debit side (Left-hand side) while all payments are shown on the credit side (right-hand side).

* This account starts with the opening cash and bank balance and ends with their closing balance.

* Items in this account are recorded under suitable heads

* Receipts and payments Account records only the actual receipt and payment of cash.

Non-cash expenses such as depreciation, outstanding expenses, Etc. are not shown in it.

Features of Receipts and Payments Account

1. Receipts and payments account is a real account. Thus Receipts are shown on its debit side and payments on the credit side.
2. Excess receipts over payments is the closing balance of cash or bank which is shown in the Balance sheet on the asset side.
3. This account begins with the opening balance of cash and bank and ends with the closing balance of cash and bank balance.
4. An item may be repeated many times in a cash book, but it is shown once in ‘Receipts and Payment Account’.
5. All cash payments are shown on its credit side irrespective of the fact whether these are of capital nature or of revenue nature and whether they relate to current year, previous, or next year.
6. Receipts and payments Account records only the actual receipt and payment of cash. Non Cash expenses such as Depreciation, outstanding exp. Etc. are not shown in it.
7. It is prepared by not-for-profit organization.
8. It is prepared on the basis of cash book.
9. It is maintained on cash basis of accounting.
10. It is an assets account.

Need for preparing Receipts and Payments Account

* As most of the transactions of Not-for-Profit Organisations are for cash, the Receipts
and Payments Account shows most of the items at one place.
* As it is in a summary form, it gives an idea of large number of transactions at a glance.
* It contains accounting information under various heads. So it gives information itemwise
for the accounting year.
* It shows the closing cash or/and bank balance, this cash/Bank balance is taken to the
Balance Sheet.
* The Receipts and Payments Account serves the purpose of trial balance and becomes
the basis of preparing financial statements i.e. Income and Expenditure Account and
Balance Sheet for the organization.
* Very small Not-for-Profit Organisations (NPOs) prepare only Receipts and Payments
Account

Preparation of Receipts and Payments Account

Following are the steps followed to prepare Receipts and Payments A/c :
* At first, the cash and bank balance carried forward from the last year is shown on its debit side. In case there is bank overdraft at the beginning of the year, enter the same on the credit side of this account.
* All receipts are recorded on its debit side (Left-hand side) while all payments are shown on the credit side (right-hand side).
* The amounts are shown under relevant heads such as subscription, donations, Entrance fees, etc. on the receipts side and salary, rent, General expenses, purchase of sports equipment, books etc. on the Payment side.
* Non-Cash expenses not recorded in Receipts and Payments account.
* The amounts comprise only cash and all cash received or paid during the period for which Receipts and Payments Account is prepared.
* No distinction is made between the items of revenue nature or capital nature and whether these belong to current year, previous year, or the coming year.
Finally, this account is balanced by deducting the total of the credit side i.e. the total
payments from the total of the debit side i.e. total receipts and is put on the credit side
as ‘balance c/d’.

Format of Receipts and Payments Account
Or

Specimen of Receipts and Payments Account

Example:

From the information given below prepare Receipts and Payments Account of BHARAT CLUB for the year ended on March 31, 2021.

Cash in hand as on 1.04.2021 90,000
Cash at bank as on 1.04.2021 1,84,000
Subscription :
Previous Year 75,000
Current Year 2,84,000
Next Year 66,000 4,25,000
Entrance Fees 45,000
Life membership Fees 75,000
Donations for Building 3,51,000
Sale of old Bats and Balls 21,000
Printing and stationery 25,000
Electricity Charges 35,000
Telephone Charges 43,000
Wages and Salaries 1,40,000
Interest on Investments 20,000
Lockers Rent 28,000
Purchase of Sports Material 2,00,000
Purchase of Government Securities 4,00,000
Cash in hand as on 31.0.3.2021 72,000
Cash at bank as on 31.03.2021 3,24,000