Question

With reference to Receipts & Payments Account which feature(s) is/are correct?

1. It is a real account.
2. It reveals the surplus or deficit for the year.
3. It is a summary of cash receipts.
4. It contains non-cash items.

Options

• 1 and 3

• 2 and 4

• Only 3

• Only 4

Answer 1

1 and 3

Explanation:

The Receipts and Payments Account is a real account since it represents cash assets and adheres to the golden rule of “debit what comes in and credit what goes out”. It just serves as a chronological overview of all actual cash and bank transactions and payments, while exposing the surplus or deficit is the responsibility of the income and expenditure account, and non-cash elements such as depreciation are completely removed.