Question

Distinguish between Income and Expenditure Account and Receipts and
Payments Account on the basis of 'Closing Balance'.
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Answer 1

Answer:

Receipts and Payments Account Income and Expenditure Account

1 It is a summarized statement of all cash transactions during an accounting year. 1 It is the account of revenue income and revenue expenditure of an accounting year.

2 Only cash transactions are recorded here. 2 It is not confined to, cash transactions only, i.e. non-cash transactions are also included in it.

• 3 The portion of income or expenditure which has been received or paid in cash this year, is recorded here 3 The whole amount of income or expenditure—whether received or paid in cash or not—is recorded in it.

4 Transactions involving cash receipts are recorded on Debit side and those involving cash payments are recorded on Credit side. 4 All expenditures are recorded on Debit side and all incomes on Credit side.

5 Transactions—both capital and revenue-are recorded here. 5 Only revenue transactions are recorded here.

6 Its balance can never be credit. 6 Its balance may be either debit or credit.

7 Its balance is carried over to Receipts & Payments Account of the next year. 7 Its balance is transferred to Capital Fund.

8 This account shows opening balance except in the first year. 8 It has no opening balance.

9 The closing balance of this account represent in the first year. 9 Its. closing balance represents either surplus or deficit. Credit balance indicates surplus, while debit balance indicates deficit.

10 This account records transactions relating to past, present and future, years. Hence, no adjustment is made for pre-received or accrued incomes and pre-paid or outstanding expenses. In a word, it is prepared on cash basis. 10 Transactions relating to the current year only are recorded in it. Hence, adjustments are invariably made for pre-received or accrued incomes and pre-paid or outstanding expenses. In a word, it is prepared on Accrual basis.

11 It is, in fact, an abridged Cash Book. 11 It is, infect, similar to Profit & Loss ' Account of a profit-seeking business

concern.

12 It is outside the Double Entry system. 12 It is within the Double Entry system.

13 It is not accompanied by Balance Sheet. 13 It is accompanied by Balance Sheet

14 Its preparation is not compulsory. 14 It is compulsory. It must be prepared in order to ascertain the true result of a concern.