Certainly, proper aws accounts sell 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.
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) 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, 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: !