Question

Limitations of receipt and payment account

Answer 1

The receipts and payments accounts suffers from the following limitations:

Receipts and payments account does not differentiate capital and revenue expenses and incomes.

Receipts and payments account fails to show expenses and incomes on accrual basis.

Receipts and payments account fails to show surplus and deficiency.

Answer 2

Explanation:

it does not disclose the accurate income and expenditure during the current year .

trial balance cannot be drawn on the basis of this account .

it does not disclose the surplus or deficiency of the institution but simply disclose the balance .

it is not prepared on accural basis .

it cannot be used by a concern where credit transaction take place in large numbers .