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Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account : Not-for -Profit Organisations refer to the organisations that are for used for the welfare of the society and are set up as charitable institutions Accounting for Not-for-Profit Organisation which function without any profit motive. Their main aim is to provide service to a specific group or the public at large.

Normally, they do not manufacture, purchase or sell goods and may not have credit transactions. Hence they need not maintain many books of account (as the trading concerns do) and Trading and Profit and Loss Account. The funds raised by such organisations are credited to capital fund or general fund. The major sources of their income usually are subscriptions from their members donations, grants-in-aid, income from investments, etc.

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

The main objective of keeping records in such organisations is to meet the statutory requirement and help them in exercising control over utilisation of their funds. They also have to prepare the financial statements at the end of each accounting period (usually a financial year) and ascertain their income and expenditure and the financial position, and submit them to the statutory authority called Registrar of Societies.

The main characteristics of such organisations are:

1. Such organisations are formed for providing service to a specific group or public at large such as education, health care, recreation, sports and so on without any consideration of caste, creed and colour. Its sole aim is to provide service either free of cost or at nominal cost, and not to earn profit.

2. These are organised as charitable trusts/societies and subscribers to such organisation are called members.

3. Their affairs are usually managed by a managing/executive committee elected by its members.

4. The main sources of income of such organisations are: (i) subscriptions from members, (ii) donations, (iii) legacies, (iv) grant-in-aid, (v) income from investments, etc.

5. The funds raised by such organisations through various sources are credited to capital fund or general fund.

6. The surplus generated in the form of excess of income over expenditure is not distributed amongst the members. It is simply added in the capital fund.

7. The Not-for-Profit Organisations earn their reputation on the basis of their contributions to the welfare of the society rather than on the customers’ or owners’ satisfaction.

8. The accounting information provided by such organisations is meant for the present and potential contributors and to meet the statutory requirement.

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

Final Accounts or Financial Statements:

The Not-for-Profit Organisations are also required to prepare financial statements at the end of the each accounting period. Although these organisations are non-profit making entities and they are not required to make Trading and Profit & Loss Account but it is necessary to know whether the income during the year was sufficient to meet the expenses or not. Not only that they have to provide the necessary financial information to members, donors, and contributors and also to the Registrar of Societies.

For this purpose, they have to prepare their final accounts at the end of the accounting period and the general principles of accounting are fully applicable in their preparation as stated earlier, the final accounts of a ‘not-for-profit organisation’ consist of the following:

(i) Receipt and Payment Account

(ii) Income and Expenditure Account, and

(iii) Balance Sheet.

The Receipt and Payment Account is the summary of cash and bank transactions which helps in the preparation of Income and Expenditure Account and the Balance Sheet. Besides, it is a legal requirement as the Receipts and Payments Account has also to be submitted to the Registrar of Societies along with the Income and Expenditure Account, and the Balance Sheet.

Income and Expenditure Account is akin to Profit and Loss Account. The Not-for-Profit Organisations usually prepare the Income and Expenditure Account and a Balance Sheet with the help of Receipt and Payment Account. However, this does not imply that they do not make a trial balance. In order to check the accuracy of the ledger accounts, they also prepare a trial balance which facilitates the preparation of accurate Receipt and Payment Account as well as the Income and Expenditure Account and the Balance Sheet.

In fact, if an organisation has followed the double entry system they must prepare a trial balance for checking the accuracy of the ledger accounts and it will also facilitate the preparation of Receipt and Payment account. Income and Expenditure Account and the Balance Sheet.

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

Receipt and Payment Account

It is prepared at the end of the accounting year on the basis of cash receipts and cash payments recorded in the cash book. It is a summary of cash and bank transactions under various heads. For example, subscriptions received from the members on different dates which appear on the debit side of the cash book, shall be shown on the receipts side of the Receipt and Payment Account as one item with its total amount.

Similarly, salary, rent, electricity charges paid from time to time as recorded on the credit side of the cash book but the total salary paid, total rent paid, total electricity charges paid during the year appear on the payment side of the Receipt and Payment Account. Thus, Receipt and Payment Account gives summarised picture of various receipts and payments, irrespective of whether they pertain to the current period, previous period or succeeding period or whether they are of capital or revenue nature. It may be noted that this account does not show any non cash item like depreciation.

The opening balance in Receipt and Payment Account represents cash in hand/cash at bank which is shown on its receipts side and the closing balance of this account represents cash in hand and bank balance as at the end of the year, which appear on the credit side of the Receipt and Payment Account. However, if it is bank overdraft at the end it shall be shown on its debit side as the last item.

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

Salient Features

1. It is a summary of the cash book. Its form is identical with that of simple cash book (without discount and bank columns) with debit and credit sides. Receipts are recorded on the debit side while payments are entered on the credit side.

2. It shows the total amounts of all receipts and payments irrespective of the period to which they pertain . For example, in the Receipt and Payment account for the year ending on March 31, 2015, we record the total subscriptions received during 2014–15 including the amounts related to the years 2013–2014 and 2015-2016. Similarly, taxes paid during 2014–15 even if they relate to the years 2013–14 and 2015–2016.

3. It includes all receipts and payments whether they are of capital nature or of revenue nature.

4. No distinction is made in receipts/payments made in cash or through bank. With the exception of the opening and closing balances, the total amount of each receipt and payment is shown in this account.

5. No non-cash items such as depreciation outstanding expenses accrued income, etc. are shown in this account. 6. It begins with opening balance of cash in hand and cash at bank (or bank overdraft) and closes with the year end balance of cash in hand/ cash at bank or bank overdraft. In fact, the closing balance in this account (difference between the total amount of receipts and payments) which is usually a debit balance reflects cash in hand and cash at bank unless there is a bank overdraft.  

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

Steps in the preparation of Receipt and Payment Account

1. Take the opening balances of cash in hand and cash at bank and enter them on the debit side. In case there is bank overdraft at the beginning of the year, enter the same on the credit side of this account.

2. Show the total amounts of all receipts on its debit side irrespective of their nature (whether capital or revenue) and whether they pertain to past, current and future periods.

3. Show the total amounts of all payments on its credit side irrespective of their nature (whether capital or revenue) and whether they pertain to past, current and future periods.

4. None of the receivable income and payable expense is to be entered in this account as they do not involve inflow or outflow of cash.

5. Find out the difference between the total of debit side and the total of credit side of the account and enter the same on the credit side as the closing balance of cash/bank. In case, however, the total of the credit side is more than that of the total of the debit side, show the difference on the debit as bank overdraft and close the account.

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

From the following information based on the data assimilated from the cash book given in example 1, at page 4, the Receipt and Payment Account of Golden Cricket Club for the year ended on March 31, 2015 will be prepared as follows:

Summary of Cash Book

Details Amount (Rs.)
Cash in hand as on April 1, 2014

Cash at bank as on April 1, 2014

Subscription:             Rs.

 2013-14                      30,000

 2014-15                   2,25,000

 2015-16                       10,000

                            =     2,65,000

Donation for Building

Entrance fees

Life membership fee

Printing and Stationery

Lighting

Rates and Taxes

 Telephone charges

Postage and courier

Wages and Salaries

Insurance Premium

Interest on government securities

Locker rent

Purchase of government securities

Cash in hand as on March 31, 2015

Cash at bank as on March 31, 2015

  20,000

  35,000

 

 

 

 

 

  60,000

  23,000

  20,000

  38,750

  26,250

  17,000

    2,600

    2,000

  88,000

   15,000

   18,000

   42,000

2,00,000

    23,400

    70,000

 

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Accoun                 

   Receipt and Payment Account for the year ending March 31, 2015

Receipts Amount(Rs.) PaymentsAmount (Rs.)
Cash in hand as on

April 1, 2014

Cash at bank as on

 April 1, 2014

Subscription:

 2013–14      30,000

2014–15    2,25,000

2015–16        10,000

Donation for building

Entrance fees

Life membership fee

Interest on investment

Government securities Locker rent 

Total

   20,000

 

   35,000

 

 

 

 

2,65,000

   60,000

   23,000

   20,000

   18,000

   42,000

 

4,83,000

 

Printing and Stationery

Lighting

Rates and Taxes

Telephone charges

Postage and Courier

Wages and Salaries

Insurance Premium

Purchase of govt. securities

Cash in hand as on

March 31, 2015

Cash at bank as on

in March 31, 2015

Total

 

 

   38,750

   26,250

   17,000

    2,600

    2,000

   88,000

   15,000

2,00,000

    23,400

    70,000

4,83,000


Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

Illustration 1 :  From the following particulars relating to Silver Point, prepare a Receipt and Payment account for the year ending March 31, 2015.

ParticularsAmount (Rs.) ParticularsAmount (Rs.)
Opening cash balance

Opening bank balance

Subscriptions collected for:

2013-14     Rs.    500

2014-15     Rs. 7,600

2015-16     Rs.    900

Sale of refreshments

Entrance fees received

1,000

7,200

 

 

 

9,000

1,000

1,000

Sale of old sports materials

Donation received for pavilion

Rent paid

Sports materials purchases

Purchase of refreshments

Expenses for maintenance

of tennis court

Salary paid

Tournament expenses

Furniture purchased

Office expenses

Closing cash in hand

1,200

4,600

3,000

4,800

600

2,000

 

2,500

2,400

1,500

1,200

400

                      Books of Silver Point Receipt and Payment Account for the year ending March 31, 2015

ReceiptsAmount (Rs.) PaymentsAmount (Rs.)
 

Balance b/d Cash

 Bank

 Subscriptions

2013-14       500

2014-15    7,600

2015-16       900

Sale of refreshments 

Entrance fees 

Sale of old sports materials

Donation for pavilion

 

 

       1,000

       7,200

 

 

 

       9,000

       1,000

       1,000

      1,200

     4,600

= 25,000

 Rent 

Sports materials purchased

Purchase of refreshments

Maintenance expenses for tennis court

Salary 

Tournament expenses

Furniture purchased 

Office expenses

Balance c/d Cash

Bank (balancing figure)

 

 

      3,000

      4,800

         600

      2,000 

      2,500

      2,400

      1,500 

      1,200

         400

      6,600

= 25,000

for more details On Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account syllabus check here Accountancy Syllabus

Karnataka Class 12 Commerce Accountancy Preparation of Receipt and Payment Account

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Karnataka Class 12 Commerce Accountancy Capital and Revenue Items Books to downloadDownload Link
  • Non Profit Organisations book
  • Need for Maintaining of Accounts books by Non Profit Organisation
 

  • Accounting book 1
 

  • Accounting book 2
  • Accounting book 3
  • Need for Maintaining of Accounts notes by Non Profit Organisation
  • Need for Maintaining of Accounts guide by Non Profit Organisation
  • Need for Maintaining of Accounts guide by Non Profit Organisation 1
  • Need for Maintaining of Accounts guide by Non Profit Organisation 2

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