Certainly, proper accounting is essential for non-trading institutions. These concerns maintain, generally, a cash book and later they prepare a summary of cash transactions appearing in the cash book. This summary takes the form of an account known as receipts and payments account.

Such concerns also prepare ‘income and expenditure account’ (which is more or less on the lines of profit and loss account) and the Balance Sheet. buypsychedelicaustralia

The day-to-day accounting consists of maintaining.

(i) Cash book for recording receipts and payments, and

(ii) Ledger for classification of transactions under proper heads.

Receipts and payments account

It is a summary of cash book for a given period, but the Receipts and Payments account shows the totals of cash transactions under different heads. All the receipts, be cheque or cash are entered on the debit (receipts) side (as in cash book) whereas all the payments (both by cheque or cash) freepornoavis are shown on the credit (payments) side. Following features of the receipts and payments account will help to identify its nature clearly :

1. It is a summary of cash book, like a cash book, receipts are shown on the debit side and
payments on the credit side.

2. Cash and bank items are merged in one column. That means receipts in cash as-well-as by , cheque are entered in one column on debit and payments in cash as-well-as by cheque are entered in one column on credit side. Contra entries between cash and bank get eliminated.

3. It is not a part of double entry book-keeping. It is just a summary of cash book which is a , part of double entry system.

4. Just like cash book, it starts with the opening balance of cash and bank and closes with the closing balance of cash and bank.

5. Both revenue and capital receipts and payments are recorded in this account. For example, …An organization that is exclusively set up to carryon with the object of carrying out social service or promo & organization of social activities, foutatunisia is a non-trading enterprise. payment for rent and payment for building and machinery both are recorded on its payments side. Similarly, receipts on account of subscription and machinery are shown on the receipts side.

6. Usually, it shows a debit balance which represents cash in hand and at bank. However, in case of bank overdraft, which is larger than cash in hand, the account will show a credit balance.

7. Receipts and payments account fails to disclose gain or loss made by the concern during the period because (a) it is prepared on actual receipt basis i.e. it records all receipts-irrespective of the period to which it relates (previous year, current year or future), (b) it also ignores the nature of the receipts and payments (whether capital or revenue). I

8. Accounting concept of gain or loss is based on “accrual concept” which by its very nature “receipts and payments account” is not capable of considering. Therefore, fails to disclose gain or loss (earned or suffered by the concern) during the period. For example, this account ignores: !

(i) Decrease or increase i.e. depreciation or appreciation in the value of assets;

(ii) Increase or decrease in the value of stock;

(iii) Provision for expenses incurred but payments not made-outstanding expenses.

(iv) Accounting for payment in advance for the services to be utilized in the next accounting period-prepaid expenses.
It also fails to distinguish between:

(v) Capital and revenue payments-whether expenditure or purchase of an asset, and

(vi) Business charge and appropriation- whether Deli Larchmont NY business expenditure or drawings.

Limitations of receipts and payments account

Receipts and payments account suffers from following limitations :

(a) It does not show expenses and incomes on accrual basis.

(b) It does not show whether the club or society is able to meet its day-to-day expenses out of its incomes.

(c) It does not show expenses on account of depreciation of assets.

(d) It does not explain the details about many expenses and incomes. In order to explain such questions, treasurer of the club prepares ‘Income and expenditure account’ and balance sheet.

Income and expenditure account

This account is prepared by non-trading concerns who want to know if during the financial year their income has been more than their expenditure i.e. profit or vice versa ( i.e. loss). Since the object of these concerns is not primarily to’ earn profit, therefore, they feel shy in giving it the name of profit and loss account. Because the word ‘profit’ is a taboo which any society ‘looks down upon’. Of course, it discloses whether the concerned institution earned or lost.

It is equivalent to and serves the purpose of ‘profit and loss account’.

It is prepared on “accrual basis” (not on receipt basis) meaning thereby that all incomes are to be included which have been earned in the relevant period (whether actually received or not). Similarly, streetwear it includes all expenses incurred in the relevant period (whether actually paid or not). This account serves exactly the purpose which ‘profit and loss account’ serves in a trading concern. On the pattern of ‘profit and loss account’ income is shown on the credit side and expenditure on the debit side. It also distinguishes between ‘capital & revenue’ items i.e. it does not take into consideration capital items {both receipts and payments). It follows double entry principles faithfully.