Simply put, a receipt and payment account is a summarised and abridged cash-book prepared for a pre-selected period of time. Such an account presents brief details of all cash transactions done during that specified period. Most NPOs prepare this account when a calendar year ends.
Later, armed with some extra information, an income and expenditure (I&E) account is framed. It must be noted here that a receipt and payment account does not reflect the true financial viability of a Non-Profit. Only an I & E account can do that.
Receipt and payment accounts are necessary to fulfil various governmental oversight norms. They also highlight the direction in which an NPO is going financially.
Task for Students: You can easily go online and research about the largest NPOs in India and the world. Read about what they do, how they give back to societies across the planet, and how their funds are allocated.
It must be remembered that this type of account summarises the receipts and payments in the daily cash book. It cannot reflect the true or actual financial status of the NPO.
Here are some of the main features of these accounts.
Receipts and Payments Accounts are simply summaries of cash books. They are later incorporated at the end of a Financial Year to complete final accounts.
All cash that is received will go to the debit side. All cash which has been paid throughout the year will go to the credit side.
Both payments in cash and receipts are considered and clubbed. Their nature, capital or revenue does not matter.
An R&P account will only reflect cash transactions.
Students of commerce must remember that such accounts tend to have a debit balance. However, if there is any overdraft, it will be reflected in credit balance.
All Receipts and Payments accounts will reflect cash in hand and closing cash in the bank without exception.
Some non-cash items may, at times, appear in an R&P Account. These might include accrued incomes, any outstanding expenses and depreciation. These have been shown in a case study below.
Visit Vedantu’s other sections to get an idea of why some non-cash elements are added in a receipt and payment account. You will also see aspects of other accounts which NPOs generally maintain.
An R&P account follows a standardised format. For transparency and agility in accounting processes, all NPOs worldwide follow the Receipt and Payment Format given here.
Now that you have a receipts and payments format, here is a solved example for students of commerce.
Here is an R & P account for a fictitious company ABC Exports.
Draw up an R & P account for ABC Exports for FY 2019-2020 with the data provided.
Based on standard Receipts and Payments Format, here is the balanced table of accounts.
For FY 2019-2020
Task for you: Visit the website of any known NPO and check their accounts. You will get first-hand knowledge of how receipts and payments accounts work in real life. Also, to know the intricate drivers of a nation’s economy, check our website and best-in-class study materials. You can also download the Vedantu app.
1. What is the Difference Between Receipt and Payment Account and Income and Expenditure Account?
An R&P account is made for a particular period while an I&E account covers an entire Financial Year.
2. What is Difference Between Receipts and Payments Account and Income and Expenditure Account Format?
An R&P account summarises cash transactions for a period and is classified as a real account. But an I&E account is a nominal account.
3. How to prepare a Receipt and Payment Account?
All cash transactions are collected and collated and then put in generally agreed formats to prepare a receipt and payment account. Visit Vedantu’s other sections on NPOs and know more today!