Distinguish between Receipts and Payments Account and Income and Expenditure Account.
|Basis of Difference||
Receipts and Payments Account
|Income and Expenditure Account|
|1. Nature||It is a summary of cash and bank transactions||It is a summary of current year income and expenses|
|2. Revenue and Capital||It records transactions related to both revenue and capital nature.||It records transactions related to revenue nature only.|
|3. Debit Side||Debit side of this account records cash and bank receipts during an accounting period.||Debit side of this account records expenses and losses incurred in the current accounting period.|
|4. Credit side||Credit side of this account records payments in cash and through cheques.||Credit side of this account records income and gains earned in the current accounting period.|
|5. Type of account||It is a Real Account||It is a Nominal Account|
|6. Period||It records receipts and payments made during the year that may be related to the current accounting period or the preceding period and the succeeding accounting period.||It only records income and expenditure made during the current accounting period.|
|7. Object||This account depicts the cash position of an NPO.||This account shows the net result in terms of surplus or deficits due to the business activities during the year.|
|8. Opening Balance||This account begins with the opening balance of cash in hand and cash at bank or overdraft.||Usually, it has no opening balance but sometimes surplus or deficits forwarded from the last accounting period (if not added to the Capital Fund) can be shown as the opening balance of this account.|
|9. Closing balance||The balancing figure of this account is expressed in terms of the closing balance of cash in hand and cash at bank or overdraft.||The balancing figure is expressed in terms of either surplus (if incomes > expenses) or deficit (if expenses > incomes).|
|10. Depreciation||It does not include non-cash items like depreciation, appreciation, etc.||It includes non-cash items like depreciation, bad-debts, provisions, etc. in order to ascertain the actual net profit or net loss.|
|Receipts and Payments during the year can be adjusted before preparation of the financial statements.||Adjustments regarding both cash and non-cash transactions can be made.|
12. Transfer of Balance
|The opening balance of this account is brought forward from the last year's Receipts and Payments Account and the closing balance of this account is carried forward to the subsequent year's Receipts and Payments Account and is shown in the Balance Sheet of the current accounting period.||If the closing balance of this account is surplus then it is added to the Capital Fund in the Balance Sheet. If the closing balance is deficit then it is deducted from the Capital Fund in the Balance Sheet.|
It is prepared on cash basis.
|It is prepared on accrual basis.|
Concept: Feature of Receipts and Payments Account
Is there an error in this question or solution?