Question

“Receipts and payments account serves as the basis for preparing the balance sheet of non-trading organisation.” Justify this statement.

Answer 1

Against:

1. A non-trading organization’s balance sheet does not start with the receipts and payments account.
2. The closing balance sheet is prepared using the Income and Expenditure Account as well as the opening balance sheet.
3. The Receipts and Payments Account is a summary of all cash transactions that are equal between capital and revenue items or match income and expenses to the appropriate period.
4. As a result, it does not provide the necessary asset, liability, and capital information to create a complete balance sheet.