Professional Documents
Culture Documents
RECEIPT AND
PAYMENT
ACCOUNT
INTRODUCTION
• 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.
• 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.
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
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 cash book will agree with that of receipts side of
receipts and payment account., whereas the total of credit side of cash
book will agree with that of payment side of receipt and payment
account.
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.
Prepare payment and receipt account of Mumbai Cricket club at the year
ending 31st March 2020
51,200
CONCLUSION
• The receipts and payments account only shows the money coming in and
going out of the organization and not by the surplus or a deficit, which is
then found by preparing another account known as the income and
expenditure account.