Normally, the following types of statements are prepared by non-trading organization at the end of financial year:-

  • Receipt and Payment Account
  • Income and Expenditure Account

All non-trading organizations maintain the Receipts and Payment Account. For example – all voluntary organizations like sports clubs, trade unions, political associations, consumer co-operatives, medical association, automobile associations, educational institutions, hospitals, charitable trusts etc.

The aim of these organizations is not to earn the profit out of their activities. At the Annual General Meeting, the treasurer submits Receipt and Payment Account  and Income and Expenditure Account to its members.

MEANING OF RECEIPT AND PAYMENT ACCOUNT

It is prepared at the end of the financial year. It shows the summary of all receipts and payment of cash transactions under some important or desired heads. Since this account gives only the summary of cash transactions, the details of all the transaction can be seen in cash book.

Illustration:

Prepare the Receipts and Payment Account on 31.03.2016 from the following transactions of Delhi Sports Club:-

Particulars

Amount

(In Rupees)

Entrance Fees 5000/=
Subscription Collected 20000/=
Salaries Paid 10000/=
Donation for Club pavilion 200000/=
Construction for Club pavilion 150000/=
Rent paid 8800/=
News Papers and Periodicals 10000/=
Miscellaneous expenses 4000/=
Tournament Expenses 20000/=
Furniture purchased 10000/=
Outstanding Salaries and Rent 3000/=
Opening Cash in Hand 10000/=

Solution:

DELHI SPORTS CLUB

RECEPTS AND PAYMENT ACCOUNT AS ON 31.03.2016

RECEIPTS

AMOUNT

PAYMENTS

AMOUNT

(IN RS.) (IN RS.)
OPENING BALANCE

10000

SALARIES

10000

ENTRANCE FEES

5000

CONSTRUCTION FOR  –
DONATION FOR CLUB PAVILION

200000

CLUB PAVILION

150000

SUBSCRIPTIONS

20000

RENT

8800

NEWSPAPERS & PERIODICALS

10000

MISCELLANEOUS EXPENSES

4000

FURNITURE PURCHASED

10000

TOURNAMENT EXPENSES

20000

CLOSING BALANCE OF CASH

22200

TOTAL

235000

TOTAL

235000

LIMITAION OF RECEIPT AND PAYMENT ACCOUNT

Following are the limitations of Receipt and Payment Accounts:-

  • Expenses and incomes are not shown on accrual basis.
  • It is very difficult to know whether these types of organizations are able to meet the expenses out of the income.

INCOME AND EXPENDITURE ACCOUNT

Income and Expenditure account shows the summary of all incomes and expenditures of an organization for complete year. It is just like Profit and Loss Account. Following points should be noted in respect of Income and Expenditure Account:-

  • It is a nominal account.
  • All the expenses are shown in debit side.
  • All incomes are shown in credit side.
  • It shows income and expenditure of current year only on accrual basis.
  • Only revenue expenses are shown in this account. No capital expenditure is shown in this account.

Illustration:-

Prepare the Income and Expenditure Account of XYZ Club for the financial year 2015-16 from the following transactions:-

RECEIPTS

AMOUNT

PAYMENTS

AMOUNT

(IN RS.) (IN RS.)
OPENING BALANCE

18000

SALARIES

48000

SALE OF INVESTMENTS

20000

STATIONERY

2000

DONATIONS

1000

DEFENCE BONDS

30000

SUBSCRIPTIONS

90000

RENT

5000

SALE OF OLD FURNITURE

3000

CYCLE PURCHASED

3000

 (BOOK VALUE RS.4000/=) FURNITURE PURCHASED

20000

CLOSING BALANCE OF CASH

24000

TOTAL

132000

TOTAL

132000

Solutions:-

XYZ CLUB

INCOME AND EXPENDITURE ACCOUNT AS ON 31.03.2016

  DEBIT   CREDIT

EXPENDITURE

AMOUNT

INCOME

AMOUNT
  (IN RS.)   (IN RS.)
SALARIES

48000

SUBSCRIPTIONS

90000

RENT

5000

DONATIONS

1000

STAIONERY

2000

LOSS ON SALE OF FURNITURE

1000

EXCESS OF INCOME OVER-
EXPENDITURE

35000

TOTAL

91000

TOTAL

91000

Note:

  • Sale of investment is not revenue income.
  • Loss on sale of furniture is to be shown in expenditure side. i.e. Book value less sale value.
  • Purchase of Defence Bonds is not expenditure. It in an investment.
  • Furniture is a capital expenditure.
  • Cycle is also capital expenditure.

THE DIFFERENCE BETWEEN RECEIPT AND PAYMENT ACCOUNT AND INCOME AND EXPENDITURE ACCOUNT

Following are the differences between these two accounts:-

Receipt and Payment Account

Income and Expenditure Account

It is a real account. It is a nominal account
It is cash account of non-trading organizations. It is like profit and loss account
All receipts are shown in debit side of this account. All expenses and losses are shown in debit side of this account.
All payment are shown in credit side of this account. All incomes are shown in credit side of this account
Opening balance of cash is shown in beginning of this account. No such balance is shown in beginning of this account
Balance at the end represents as closing balance of cash. Balance at the end represents excess of income over the expenditure or vice versa.
All revenue and capital receipts are recorded in this account. It records only revenue receipts.
It shows all receipts and payment whether they relate to other financial year. It show income and expenditures of current year only.
Depreciation, bad debits etc. are not recorded in this account. Depreciation, bad debits are recorded in this account since these are the losses to the organization.
As it is a cash account, it will always show debit balance. This account may show debit or credit balance according to loss or profit.

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