Proper accountants for taxes is crucial for institutions that are not trading. These companies keep a cash record and prepare a summary listing all cash transactions. This summary can be described as a receipts or payments account.
These companies also prepare an ‘income and expense account’ (which is more on the lines profit and loss account) as well as the Balance Sheet.
Accounting is about maintaining.
(ii) Cash book to record receipts and payments.
(iii). Ledger for the classification of transactions under appropriate heads.
Receipts and payments account
It shows the cash book summary for a particular period. The Receipts or Payments account displays the total cash transactions under various heads. All receipts, cash or cheque, are entered on the debit (receipts), whereas all payments (both cheque and cash) are shown in the credit (payments). These features will help you identify the nature of the payments account and receipts.
1. It is a summary or cash book. Recipients are shown on debit side.
Credit side payments
2. The one column that combines cash and bank items is called “Cash”. Receipts in cash and cheques are combined in one column. Payments in cash and cheques are also entered in one column. Credit side is entered in one columns. Contra entries between cash & bank are eliminated.
3. It is not part double entry book-keeping. It is simply a summary for cash book that is a part double entry system.
4. Similar to cash book, it begins with the opening balance in cash and bank, and closes with that closing balance.
5. In this account are both capital receipts, revenue, and payments. This account can be used to record revenue and capital receipts. Its payments side records both rent payments and building and machinery payment. Receipts on account for subscription and machinery can also be found on the receipts side.
6. It usually shows a debit balance that represents cash in bank and cash in hand. The account will also show a credit balance if there is a bank overdraft.
7. Receipts or payments account doesn’t disclose gains or losses made by the concern over the period. It is prepared on the actual receipt basis. it records all receipts-irrespective of the period 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 concept of gain and loss is based on “accrual idea”, which is not possible to consider because “receipts account” is not capable, by its very nature, of considering. Thus, it fails to disclose gains or losses (earned or suffered) during the period.