Receipts and Payments Account for Not-For-Profit Organisations

Let us make in-depth study of the meaning and features of Receipts and Payments Account for Not-For-Profit organisations.

Meaning of Receipts and Payments Account:

Receipts and Payments Account is a real account showing summary of all cash and bank transactions occurred during the accounting year. It is prepared at the end of the accounting year. All cash and bank transactions, taken from the cash book are shown under suitable headings and titles, such as subscriptions, salaries, rent, electricity charges etc.

It is worth mentioning that Receipts and Payments Account is a summary of all cash and bank transactions under various suitable heads. For example, entrance fees received from the members on different dates appear on the debit side of the cash book on respective dates.

However, in the Receipts and Payments Account, entrance fees shall be shown as one item with its total amount. Similarly, all receipts and payments are shown as one item with its total amount. Outstanding items are not recorded in the Receipts and Payments Account and only cash transactions are recorded in it.

In a going concern, the debit side is started with the opening cash and bank balances. However, if there is an adverse balance in bank (i.e, bank overdraft), the same shall be shown on its credit side. The actual cash received and actual cash paid during the related accounting period is recorded in it, irrespective of the fact whether those receipts/payments relate to past, present or future accounting period and without distinguishing them into capital or revenue.

On the debit side, all receipts and on the credit side, all payments are recorded. At the end of the accounting period, this account is totaled up and balanced. The cash and positive bank balances are shown on the credit side as closing balance. Negative bank balance (i.e. bank overdraft), however, is shown on the debit side as closing balance.

Features of Receipts and Payments Account:

The basic features of Receipts and Payments Account are as under:

(i) It is a real account and summarizes all cash transactions of non-profit organizations.

(ii) It starts with the opening balance of cash and bank balances and ends with the closing balance of cash and bank balances.

(iii) It is similar to cash book and contains all receipts on debit side and payments on credit side.

(iv) Distinction of capital and revenue is not made while recording cash transactions in it.

(v) All actual receipts and actual payments (whether they are related to the past, present or future accounting period) of the relevant accounting period are recorded in this account.

It should be noted that Receipts and Payments Account is not as comprehensive as Trial Balance, even then it helps in preparation of final accounts of non-profit organization if it is supported with opening balance sheet and all relevant information and adjustments. For this reason, sometimes this is also known as Cash Trial.

A specimen of a Receipts and Payments Account is given below:

Receipts and Payments Account

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