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Certainly, proper accounting is significant for non-trading institutions. These concerns maintain, generally, a cash book and later they prepare a summary of cash transactions appearing in the cash book. This summary takes the form of an list known as receipts and payments account.
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Such concerns also prepare 'income and expenditure account' (which is more or less on the lines of profit and loss account) and the equilibrium Sheet.
The day-to-day accounting consists of maintaining.
(i) Cash book for recording receipts and payments, and
(ii) Ledger for classification of transactions under proper heads.
Receipts and payments account
It is a summary of cash book for a given period, but the Receipts and Payments list shows the totals of cash transactions under different heads. All the receipts, be cheque or cash are entered on the debit (receipts) side (as in cash book) whereas all the payments (both by cheque or cash) are shown on the credit (payments) side. Following features of the receipts and payments list will help to recognize its nature clearly :
1. It is a summary of cash book, like a cash book, receipts are shown on the debit side and
payments on the credit side.
2. Cash and bank items are merged in one column. That means receipts in cash as-well-as by , cheque are entered in one column on debit and payments in cash as-well-as by cheque are entered in one column on credit side. Contra entries in the middle of cash and bank get eliminated.
3. It is not a part of duplicate entry book-keeping. It is just a summary of cash book which is a , part of duplicate entry system.
4. Just like cash book, it starts with the occasion equilibrium of cash and bank and closes with the end equilibrium of cash and bank.
5. Both earnings and capital receipts and payments are recorded in this account. For example, ...An society that is exclusively set up to carryon with the object of carrying out collective aid or promo & society of collective activities, is a non-trading enterprise. Cost for rent and Cost for building and machinery both are recorded on its payments side. Similarly, receipts on list of subscription and machinery are shown on the receipts side.
6. Usually, it shows a debit equilibrium which represents cash in hand and at bank. However, in case of bank overdraft, which is larger than cash in hand, the list will show a credit balance.
7. Receipts and payments list fails to disclose gain or loss made by the concern while the duration because (a) it is prepared on actual receipt basis i.e. It records all receipts-irrespective of the duration 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 plan of gain or loss is based on "accrual concept" which by its very nature "receipts and payments account" is not capable of considering. Therefore, fails to disclose gain or loss (earned or suffered by the concern) while the period. For example, this list ignores: !
(i) Decrease or growth i.e. Depreciation or appreciation in the value of assets;
(ii) growth or decrease in the value of stock;
(iii) Provision for expenses incurred but payments not made-outstanding expenses.
(iv) Accounting for Cost in develop for the services to be utilized in the next accounting period-prepaid expenses.
It also fails to distinguish between:
(v) Capital and earnings payments-whether expenditure or purchase of an asset, and
(vi) company charge and appropriation- whether company expenditure or drawings.
Limitations of receipts and payments account
Receipts and payments list suffers from following limitations :
(a) It does not show expenses and incomes on accrual basis.
(b) It does not show whether the club or society is able to meet its day-to-day expenses out of its incomes.
(c) It does not show expenses on list of depreciation of assets.
(d) It does not justify the details about many expenses and incomes. In order to justify such questions, treasurer of the club prepares 'Income and expenditure account' and equilibrium sheet.
Income and expenditure account
This list is prepared by non-trading concerns who want to know if while the financial year their earnings has been more than their expenditure i.e. profit or vice versa ( i.e. Loss). Since the object of these concerns is not primarily to' earn profit, therefore, they feel shy in giving it the name of profit and loss account. Because the word 'profit' is a taboo which any society 'looks down upon'. Of course, it discloses whether the implicated convention earned or lost.
It is equivalent to and serves the purpose of 'profit and loss account'.
It is prepared on "accrual basis" (not on receipt basis) meaning thereby that all incomes are to be included which have been earned in the relevant duration (whether undoubtedly received or not). Similarly, it includes all expenses incurred in the relevant duration (whether undoubtedly paid or not). This list serves exactly the purpose which 'profit and loss account' serves in a trading concern. On the pattern of 'profit and loss account' earnings is shown on the credit side and expenditure on the debit side. It also distinguishes in the middle of 'capital & revenue' items i.e. It does not take into observation capital items you will get new knowledge about Donations. Where you possibly can put to use within your life. And just remember, your reaction is Donations.Read more.. Non behalf club Accounting. View Related articles associated with Donations. I Roll below. I actually have suggested my friends to assist share the Facebook Twitter Like Tweet. Can you share Non behalf club Accounting.
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