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Receipts and Payments Account

A receipts and payments account is a summarized edition of the Cash book prepared at the end of an accounting period. It shows the opening balance of cash in hand at the beginning of the account and closing cash balance at the end of the financial year. Not unlike the cash account, all cash receipts are entered in its left-hand debit side while on the right-hand credit side is recorded all cash payments.

It records actual cash received such as fees, subscriptions, donations, etc and paid out without regard to capital receipts and payments. This obviates the need to make year-end adjustments as are required when the accrual basis is used as in profit making businesses. For example, rent for December not yet paid at the end of December when the financial year ends is not treated as accrued expenses as it would in a trading concern. Similarly, payment made for insurance which covers half of the following financial year is recorded in the receipts and payments account for the year but is not considered as prepaid expenses.

Besides not using the accrual basis for expenses and incomes, the receipts and payments account does not recognize the difference between capital and revenue expenses. They are all recorded in the account. Non-cash transactions that are not recorded include depreciation for fixed assets.

At the end of each accounting the receipts and payments will show a debit balance which is the closing balance. A credit balance will only arise when there is a bank overdraft with no cash in hand. A zero balance rarely happens. The receipts and payments account is maintained based on the double entry system.


The Goofy Golf Club

Receipts and Payments Account for the year ended 31 December 20X2

Receipts
$

Payments
$
Balance as at 1.1.20X1
810

Bar supplies
5,520
Subscriptions
1,485

Barman's wages
650
Bar sales
7,100
Bar expenses
325
Interest on fixed deposit140
Furniture
370



Golfing accessories
260



Committee expenses
80



Printing and stationery
110



Cleaner's wages
120



General expenses
230



Rent paid
600



Balance as at 31.12.20X2
1,270






9,535


9,535







Last Updated (Tuesday, 12 October 2010 16:51)