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:
-
It
is abridged addition of cash book - it is, in
effect, a summary of
cash
book.
-
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.
-
Cash receipts and cash payments of both capital
and revenue nature are recorded here.
-
Only cash transactions are recorded in this
account.
-
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.
-
Its closing balance indicates closing cash in
hand and closing cash at bank.
-
It
is not an account within the double entry system
- it is a statement only.
-
It
is prepared on the last day of the accounting
year.
Advantages:
The
following are the advantages of receipt and payment
account:
-
Total receipts and total payments under various
heads are available at a glance.
-
The amount of cash in hand at the year end can
be ascertained.
-
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 |
|
|
|