Receipts and payment account are a summary of cash receipts and payments received during the accounting period. It records all cash receipts and payments including capital receipts and revenue receipts respective of the accounting period. All cash (cash and bank) receipts are recorded on the debit (receipts) side and all cash (cash and bank ) payments are recorded on the credit (payments) side of the receipts and payments account.
Features of receipts and payments account
The essential features of receipts and payment account are as follows
- Summary of cash transactions: all cash receipts and payments made by the concerned during the accounting period are recorded in this book. Therefore, receipts and payments accounts is taken as a summary of cash transactions.
- Cash and Bank item in one column: All receives either cash or Bank are recorded receipts column of payment column of receipts and payment account. The case and Bank transactions are merged to avoid Contra entries of cash and Bank transactions.
- No distinction between capital and revenue: all cash receipts and cash payments irrespective of capital and revenue nature are recorded in this account. No distinction is made for capital receipts, revenue receipts, capital expenditures, and revenue transactions.
- Opening and closing balance of cash: it starts from the opening balance of cash and the bank ends with the closing balance of cash and Bank.
- Recording of cash receipts and payments: all cash and cheque received Sar recorded on the debit side whereas all cash and cheque payments are recorded on the credit side.
- Ignore non-cash transactions: It doesn’t record non-cash transactions.
Limitations of receipts and payments account
- Is does not differentiate capital and revenue expenses income.
- It fails to show expenses and incomes on accrual basis.
- It fails to show surplus and deficiency.
- It fails to show non cash transactions such as depreciation of fixed assets, pilferage, etc.