Question

What is Receipts and Payments Account? How is it different from Income and Expenditure Account?

Hint:

Remember: R& P = Cash summary (Real A/c); I& E = Surplus/deficit (Nominal A/c).

Answer 1

Step 1: Define Receipts and Payments Account (R& P A/c).
It is a real account that summarises all cash and bank transactions (both revenue and capital in nature, current and past/future) of a non-profit organisation. It starts with opening cash/bank balance and ends with closing balance.
Step 2: Purpose.
It acts like a Cash Book in summary form. It helps to know the cash position of the organisation.
Step 3: Define Income and Expenditure Account (I& E A/c).
It is a nominal account prepared on an accrual basis by non-trading organisations. It records only revenue incomes and expenses relating to the current year, to ascertain surplus or deficit.
Step 4: Distinguish between them.

Basis: R& P A/c is cash basis; I& E A/c is accrual basis.
Nature: R& P includes capital & revenue, past, present or future; I& E includes only revenue items of current year.
Opening/Closing Balance: R& P starts with opening cash/bank balance and shows closing balance; I& E has no such balances.
Objective: R& P shows cash position; I& E shows surplus or deficit.

Final Answer: \[ \boxed{\text{R& P A/c is a summary of cash transactions, while I& E A/c is like P& L to find surplus/deficit.}} \] % Quciktip