Accounting for non-profit organizations
For non-trading entities, accounting is vital. These organizations maintain a cash account and then compile a summary of cash transactions. This summary is called a receipts account or a payments account, go here.
These concern also prepare an “income and expenditure account” (which is more or fewer on the lines Profit and Loss Account) and the Balance Sheet.
Maintening is part of the day-today accounting.
Cash book to keep track of receipts and payments.
(iii). Ledger used to classify transactions according to appropriate heads.
Receipts Payments account
This account summarizes cash book transactions for a specific period. However, the Receipts-Payments account shows total cash transactions by different heads. All cash, cheques and cash receipts are entered on both the debit (receipts), side. While all payments by cheque or cash are shown on either the credit (payments), side. The following features of the receipts account and the payments account will help identify its nature:
1. It’s a summary of the cash book.
On the credit side, payments
2. One column is used for cash and bank transactions. It means that receipts in cash, as well as by cheque, are entered in the same column for debit. On credit, payments in cash are entered in the first column. Contra entries between cash or bank are eliminated.
3. It is not an integral part of double entry. It is not a summary from the cash book.
4. Like a cash book it starts with cash in bank account and ends with cash in bank account.
5. This account tracks both revenue, capital receipts and payments. For example,…An organisation that is solely set up for the purpose of carrying on social service or promo & organizing social activities is a non-trading entity. On the payments side, rent payment and payment for building or machinery are both recorded. Receipts from subscriptions and machinery, too, are displayed on the receipts’ side.
6. It typically shows a balance of debit, which represents cash in the hand and at bank. An account with a bank balance will show credit if it has a larger amount than cash in your hand.
7. Receipts-and-Payments account does not reveal gain or loss during the period. it records all receipts-irrespective of the period to which it relates (previous year, current year or future), (b) it also ignores the nature of the receipts and payments (whether capital or revenue). I
8. Accounting concept of gain/loss is based in “accrual” which, by its very nature, “receipts-and-payments account” cannot consider. Therefore, does not disclose gain or loss (earned by or suffered by concern) during that period.