Receipt and payment account

Receipt and Payment Account

1. RECEIPT & PAYMENT ACCOUNT

2. INTRODUCTION It is prepared at the end of the accounting year on the basis of cash receipts and payment recorded in this Cash Book. It is summary of cash and bank transaction under various heads.

3. MEANING “Receipt and Payment Account is the summary of cash and bank transaction which helps in the preparation of Income and Expenditure Account and the Balance Sheet”. In other words, Receipt and Payment Account is simply a summary of cash transactions as in the cash book analyzed or classified under suitable headings, including the opening and closing balance.

4. FEATURES It is a real account. Receipts are recorded in the debit side. Payment are recorded in the credit side. The receipt and payment are classified into appropriate headings. It bears proper heading with the name of the organization. No adjustments are made for depreciation, bad debts etc. in this account.

5. IMPORTANCE Total receipts and total payments under various heads are available at a glance. The amount of cash in hand at the year end can be ascertained. The correctness of cash book can be verified through it. The total of debit side of Cash Book will agree with that of receipts side of Receipt and Payment Account, whereas the total of credit side of Cash Book will agree with that of payment side of Receipt and Payment Account,

6. LIMITATIONS It does not disclose the accurate income and expenditure during the current year. It does not disclose the surplus or deficiency of the institution but simply disclose the balance. Trial Balance cannot be drawn on the basis of this account. It is not prepared on accrual basis. It cannot be used by a concern where credit transactions take place in large number.

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