Steps in preparation of receipts and payments account

Receipts and Payments Account

Receipts and Payments account is a summary of cash and bank transactions of not–for–profit organisations prepared at the end of each financial year.

It is a real account in nature. The receipts and payments account begins with the opening balances of cash and bank and ends with closing balances of cash and bank. All cash receipts are shown on the debit side and all cash payments are shown on the credit side of this account. All cash receipts and cash payments whether of capital or revenue nature will be recorded in the receipts and payments account. They may relate to the current year or the previous years or the subsequent years. It means that irrespective of the period for which the amount is received or paid, it is recorded if cash is received or paid during the year.

Non–cash items such as depreciation, outstanding expenses and accrued income are not shown in receipts and payments account.

1. Steps in preparation of receipts and payments account

Following are the steps involved in the preparation of receipts and payments account:

a)     Record the opening balance of cash in hand and favourable bank balance on the debit side of receipts and payments account. If there is bank overdraft, it must be recorded on the credit side.

b)    Actual cash receipts during the year are recorded on the debit side and actual cash payments during the year are recorded on the credit side.

c)     While recording cash receipts and payments, no distinction needs to be made between revenue and capital items. Similarly, no distinction needs to be made whether the amount received or paid relates to the current period, previous period or future period.

d)    If the total of the debit side is more than the credit side, the balancing figure will appear on the credit side. It represents the closing balance of cash or bank.

e)     If the total of the credit side is more than the debit side, the balancing figure will appear on the debit side. It represents bank overdraft.

Format of Receipts and Payment Account

Dr.   Receipts and Payments Account of ……… for the year ending ……..

Illustration 1

From the following particulars of Tamil Educational Society, prepare Receipts and Payments account for the year ended 31st March, 2019.

Solution

In the books of Tamil Educational Society

Dr.   Receipts and Payments Account for the year ended 31st March, 2019

Illustration 2

From the following particulars of Trichy Educational Society, prepare Receipts and Payments account for the year ended 31st December, 2018.

Solution

In the books of Trichy Educational Society

Dr.   Receipts and Payments Account for the year ended 31st December, 2018

Illustration 3

From the following particulars of Chennai Sports Club, prepare Receipts and Payments account for the year ended 31st March, 2018.

Solution

In the books of Chennai Sports Club

Dr.   Receipts and Payments Account for the year ended 31st March, 2018

Illustration 4

From the following particulars of Poompuhar Literary Association, prepare Receipts and Payments account for the year ended 31st March, 2019.

Solution

In the books of Poompuhar Literary Association

Dr.   Receipts and Payments Account for the year ended 31st March, 2019

Note: As outstanding salary and depreciation are non-cash items, both are to be excluded in receipts and payments account.

Illustration 5

From the following particulars of Vellore Recreation Club, prepare Receipts and Payments account for the year ended 31st March, 2017.

Solution

In the books of Vellore Recreation Club

Dr.   Receipts and Payments Account for the year ended 31st March, 2017