Receipt and Payment Account

Throughout the world and in South Asia’s booming economies, Non-Profit Organisations have emerged in significant numbers. Abbreviated as NPOs, these entities mainly serve social causes which are overlooked by governments and the private sector.

Some famous NPOs in India include HelpAge India and CRY. International NPOs like The Salvation Army and the Red Cross Society are instantly recognisable names.

Such entities need to prepare Receipts and Payments accounts so that they can have a firm grasp of their financial position. Here, we shall learn what these accounts are, along with some of their characteristics.


What are Receipt and Payment Accounts?

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.


Characteristics of an R&P Account

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.


R&P Account Format

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.

All receipts 

Amounts (in INR)

All payments

Amounts (in INR)

Opening balance 

xxx

Overdraft amount

xxx

Money in hand

xxx

xxx

Rent

xxx

Cash in bank

General Donations

xxx

Taxes as applicable

xxx

Sale of Investments

xxx

Wages and salaries

xxx

Asset sales (if any)

xxx

Printing, office items and misc.  stationery goods

xxx

Entrance fees

xxx

Entertainment expenses (if any)

xxx

Lifetime membership fees

xxx

Audit charges

xxx

Miscellaneous receipts

xxx

Asset purchase

xxx

Interest on fixed deposits

xxx

Investments

xxx

Interest earned on FDs

xxx

Sundry expenses

xxx

Proceeds from sports material sales

xxx

Publicity and advertisements

xxx

Scrap sales

xxx

Honorarium

xxx

Subscriptions

xxx

Renewals/repairs

xxx

Rents

xxx



Funds from charity

xxx




XXX


XXX


Now that you have a receipts and payments format, here is a solved example for students of commerce.


Solved example of receipt and payment account

Here is an R & P account for a fictitious company ABC Exports.


Question

Draw up an R & P account for ABC Exports for FY 2019-2020 with the data provided.

Particulars

Amount (in INR)

Particulars

Amount (in INR)

Opening cash in hand

600

Donations received for FY 2019-20

2300

Bank balance (total)

3600

Proceeds from sports material sales

600

Subscriptions for:


Materials for sports purchased

2400

2017-2018—Rs 250

4500

Expenses on beerages and food

300

2018-2019—Rs 3800

2019-2020—Rs 450

Income from refreshments provided

500

Rent (paid)

1500

Miscellaneous Fees

500

Salaries & wages (paid)

1250



Closing cash in hand

200



Purchase of furniture

750



Misc. Expenses

600



Expenses for events

1200



Maintenance

1000


Solution

Based on standard Receipts and Payments Format, here is the balanced table of accounts.

For FY 2019-2020

 Debit                                                                                                                                Credit

Receipts

Amount (in INR)

Payments

Amount (in INR)

Balance b/d


Rent (paid)

1500

Cash in hand

600

Materials for sports bought

2400

Total money in bank

3600

Subscriptions for:


Maintenance

1000

2017-18—Rs 250

4500

Expenses on refreshments

300

2018-19—Rs 3800

2019-20—Rs 450

Income from refreshments provided

500

Salaries & wages (paid)

1250

Miscellaneous Fees

500

Expenses for events

1200

Donations received for FY 2019-20

2300

Purchase of furniture

750

Proceeds from sports material sales

600

Misc. Expenses

600



Balance c/d




Cash in hand

200

Bank (Balanced Figure)





3300


12,500


12,500


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.

FAQ (Frequently Asked Questions)

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!