Receipts and Payments Account — Meaning and Features

Whatever else a Not for Profit concern eventually reports, it always starts by simply recording cash — every rupee received and every rupee paid — over the year. That record is the Receipts and Payments Account.

Nature

The Receipts and Payments Account is, in substance, nothing more than a summarised Cash Book — it is a Real Account and follows the same rule as a Cash Account: debit what comes in, credit what goes out. It is prepared purely on a cash basis.

Features

• It records every cash and bank receipt and payment made during the year — capital as well as revenue, and relating to the current year, a past year, or even a future year.
• It begins with the opening balance of cash and bank (debit side, "To Balance b/d") and ends with the closing balance of cash and bank (credit side, "By Balance c/d"), which is simply the balancing figure.
• It does not distinguish between capital and revenue items — a donation meant to build a new pavilion and a donation meant to meet running expenses are both recorded exactly the same way, as a receipt.
• It does not record any non-cash adjustment — outstanding subscription, accrued interest, depreciation, or any other item that involves no actual movement of cash never appears in this account at all.
• Being a summarised Cash Book, it is not a measure of the organisation's income or performance — a large total of receipts does not mean the organisation has done well financially, any more than a large cash balance in a trading firm's Cash Book means the firm has made a profit.
• Every Not for Profit concern must, at a minimum, prepare a Receipts and Payments Account for the year — it is the primary record from which the Income and Expenditure Account and the Balance Sheet are both later derived.

Illustrative format