Explain the statement, "Receipt and Payment Account is a summarised version of Cash Book".
Explain the statement, "Receipt and Payment Account is a summarised version of Cash Book".
Receipts and Payments Account is a summary of the Cash Book. This account is prepared by those organisations which maintain their books on cash basis. All cash receipts are recorded on the Payments side (i.e.Debit side) and all cash payments are recorded on the payments side(i.e.Credit side) of receipts and payment Account. It is prepared on the basis of cash and bank transactions recorded in the Cash Book.
It begins with the opening balance of cash and bank and ends with the closing balances of cash and bank (balancing figure) at the end of the according period. It records all the cash and bank transactions both of capital and revenue nature.
It only records the cash and bank transactions relating to the current accounting period, but also cash and bank receipts (or payments) received during the current accounting period that may be related to the previous or next accounting period. This account only helps us to ascertain the closing balance of the cash and bank and helps in assessing the cash position of an NPO. It also forms the basis for the preparation of Income and Expenditure Account.
Similarities between Receipt and Payments Account and Cash Book
The following are the features of Receipt and Payment Account that are common to those of Cash Book
(i) Nature: It is a summarised version of the Cash Book. Similar to the Cash Book, the Receipt and Payment and Account is also a Real Account.
(ii) Nature of Transactions: It records only cash and bank transactions similar to a Two-Column Cash Book. Transactions other than cash and bank like depreciation, loss/profit on sale of assets, etc are not recorded in this account.
(iii) No Distinction between Capital and Revenue Items: It records all the cash and bank receipts and payments of both capital and revenue nature. Likewise, the transactions recorded in the Cash Book are also of both capital and revenue nature.
(iv) Opening and Closing Balance: It begins with opening balance of cash and bank and ends with the closing balance of the cash and bank (balancing figure) at the end of the accounting period.
(v) Purpose: It reveals the cash position of an organisation. It helps to ascertain the total amount paid and received during an accounting period. Similarly, a Cash Book also helps us to assess the cash position of an organisation.
Thus, on the basis of the above mentioned points and similarities, the statment 'Receipt and Payment Account is a summarised version of Cash Book' is justified.
Receipts and Payments Account is a summary of the Cash Book. This account is prepared by those organisations which maintain their books on cash basis. All cash receipts are recorded on the Payments side (i.e.Debit side) and all cash payments are recorded on the payments side(i.e.Credit side) of receipts and payment Account. It is prepared on the basis of cash and bank transactions recorded in the Cash Book.
It begins with the opening balance of cash and bank and ends with the closing balances of cash and bank (balancing figure) at the end of the according period. It records all the cash and bank transactions both of capital and revenue nature.
It only records the cash and bank transactions relating to the current accounting period, but also cash and bank receipts (or payments) received during the current accounting period that may be related to the previous or next accounting period. This account only helps us to ascertain the closing balance of the cash and bank and helps in assessing the cash position of an NPO. It also forms the basis for the preparation of Income and Expenditure Account.
Similarities between Receipt and Payments Account and Cash Book
The following are the features of Receipt and Payment Account that are common to those of Cash Book
(i) Nature: It is a summarised version of the Cash Book. Similar to the Cash Book, the Receipt and Payment and Account is also a Real Account.
(ii) Nature of Transactions: It records only cash and bank transactions similar to a Two-Column Cash Book. Transactions other than cash and bank like depreciation, loss/profit on sale of assets, etc are not recorded in this account.
(iii) No Distinction between Capital and Revenue Items: It records all the cash and bank receipts and payments of both capital and revenue nature. Likewise, the transactions recorded in the Cash Book are also of both capital and revenue nature.
(iv) Opening and Closing Balance: It begins with opening balance of cash and bank and ends with the closing balance of the cash and bank (balancing figure) at the end of the accounting period.
(v) Purpose: It reveals the cash position of an organisation. It helps to ascertain the total amount paid and received during an accounting period. Similarly, a Cash Book also helps us to assess the cash position of an organisation.
Thus, on the basis of the above mentioned points and similarities, the statment 'Receipt and Payment Account is a summarised version of Cash Book' is justified.
