— Kishore V, SME and ACW at Edumarz
Receipt and Payment Account is a summarised version of Cash Book
- It is created at the end of the accounting year using the cash book’s cash receipts and cash payments. It’s a list of cash and bank transactions organised by category.
- Subscriptions collected from members on separate dates that appear on the debit side of the cash book, for example, should be displayed as one item on the receipts side of the Receipt and Payment Account with its entire amount.
- Salary, rent, and energy costs are paid on a regular basis and are entered on the credit side of the cash book, but the total salary, rent, and electricity charges paid over the year are recorded on the payment side of the Receipt and Payment Account.
- Thus, the Receipt and Payment Account presents a consolidated image of various receipts and payments, regardless of whether they relate to the current, previous, or subsequent periods, or whether they are capital or revenue in nature.
- It should be emphasised that there are no non-cash items in this account, such as depreciation.
- The initial balance of the Receipt and Payment Account reflects cash in hand/cash at the bank, which appears on the receipts side, and the closing balance of this account represents cash in hand and bank balance as of the end of the year, which appears on the credit side.
- However, if there is a bank overdraft at the end, it must be represented as the final item on the debit side.