Question

State the nature of receipts and payments account

Answer 1

A receipt and payment account is a summarized cash book for a given period

Following are the features of receipt and payment account:

1) It is abridged addition of cash book - it is, in effect, a summary of cash book.

2) All cash receipts during the whole year are recorded on its left hand (i.e., debit) side. While all the cash payments during the whole year written on its right hand (i.e., credit) side, arranged in a classified form.

3) Cash receipts and cash payments of both capital and revenue nature are recorded here.

4) Only cash transactions are recorded in this account.

5) It generally shows a debit balance. In case of bank overdraft balance, however, its net balance may be credit. Again, it may also show nil balance but such occasion is rare.

6) Its closing balance indicates closing cash in hand and closing cash at bank.

7)It is not an account within the double entry system - it is a statement only.

8)It is prepared on the last day of the accounting year.