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Accounting · Financial Statements of Not-for-Profit Organisations

Receipts and Payments Account for CA Foundation

Updated 1 October 2026

A Receipts and Payments Account is a summary of all cash and bank receipts and payments of a not-for-profit organisation in a period. Receipts go on the left (debit), payments on the right (credit). It starts with opening cash and bank balances and ends with closing balances. Record only actual cash movements.

Understand Receipts and Payments Account

A club, school, hospital or charity does not exist to earn profit. So it does not prepare a Trading and Profit and Loss Account. It keeps a cash book and, at the end of the year, summarises it into a Receipts and Payments Account.

Think of it as the cash book squeezed into one statement. Every receipt of cash or bank during the year is listed on the debit side. Every payment is listed on the credit side. The opening balance of cash and bank is shown on the debit side. The closing balance is the balancing figure, shown on the credit side.

The account is a real account in nature. It follows the cash basis, so only money actually received or paid appears. Outstanding subscriptions, prepaid expenses or accrued salaries do not appear. It also does not separate revenue items from capital items. A receipt from sale of an old asset, a donation for a building fund and a regular subscription all sit on the same side.

This is why the account alone cannot show surplus or deficit. For that you need the Income and Expenditure Account, which follows the accrual basis and includes only revenue items. The Receipts and Payments Account is usually the starting point for preparing it.

In exam questions, you are often given this account and asked to prepare the Income and Expenditure Account and Balance Sheet. You may also be asked to prepare the account itself from a list of transactions.

Key rules to remember

Closing balance of cash and bank
Closing balance = Opening balance + Total receipts − Total payments
Cash in hand can never be negative. Only the bank balance can be negative. A negative bank balance is a bank overdraft, shown on the credit (payments) side as the balancing figure in the bank column, while cash in hand is shown separately as a positive figure.
Sides of the account
Debit side = Opening balances + all receipts; Credit side = all payments + closing balances
Both sides must total the same amount.
Basis of recording
Receipts and Payments Account = cash basis, includes capital and revenue items of any period
Amounts relating to past or future years are included if cash actually moved in this year.

How to solve Receipts and Payments Account questions

Use this method for any question that asks you to prepare a Receipts and Payments Account from a cash and bank transaction list.

  1. 1Read the question and list every transaction involving cash or bank. Ignore non-cash items such as depreciation, outstanding expenses and accrued income.
  2. 2Write the opening cash in hand and cash at bank on the debit side as the first items.
  3. 3Put all money received on the debit side: subscriptions, donations, entrance fees, sale of assets, interest, sale of investments, loans taken.
  4. 4Put all money paid on the credit side: salaries, rent, purchase of assets, investments, loan repayments, and other expenses.
  5. 5Take amounts exactly as paid or received in the year, including amounts for earlier or later years.
  6. 6Total both sides. The difference is the closing cash and bank balance, shown on the credit side.
  7. 7Check that the totals agree. Cash in hand cannot be negative. Only the bank balance can be negative, and then it is a bank overdraft shown on the credit (payments) side as the balancing figure in the bank column, with cash in hand shown separately as positive.
  8. 8 Label the heading as 'Receipts and Payments Account for the year ended ...' and head each side properly.

Quickest way: Tick-and-sort cash method

When to use it: Use when the question gives a long list of mixed items and you have limited time.

  1. Scan the list and strike out non-cash items first: depreciation, outstanding, prepaid, accrued and provisions.
  2. Mark each remaining item R (receipt) or P (payment) in the margin.
  3. Write the opening balances first, then copy all R items to the left and all P items to the right.
  4. Total the receipts side including opening balances, total the payments, and find the closing balance as the difference.
  5. Do a quick check: the two totals must match. If not, recheck for a missed item or a wrong side.

Common mistakes in Receipts and Payments Account

  • Including outstanding or prepaid amounts

    Students mix up the cash basis with the accrual basis used in the Income and Expenditure Account.

    Fix: Include only the amount actually paid or received during the year. Ignore outstanding and prepaid adjustments.

  • Showing depreciation in the account

    Depreciation is a common expense so students treat it like other expenses.

    Fix: Depreciation is a non-cash item. It never appears in the Receipts and Payments Account.

  • Putting the closing balance on the wrong side

    Students copy the format of a ledger balance.

    Fix: Opening balance goes on the debit side. Closing balance is the balancing figure on the credit side.

  • Leaving out capital receipts and payments

    Students think only revenue items belong here.

    Fix: Include everything that moved cash: asset purchases, sale proceeds, donations for funds and investments.

  • Treating it as a profit-finding statement

    The two sides look like an income and expense account.

    Fix: It shows only cash flow. Surplus or deficit is found in the Income and Expenditure Account.

  • Forgetting a bank overdraft

    Students assume the closing balance is always a positive figure on the payments side.

    Fix: Cash in hand can never be negative. If the bank balance is negative, it is a bank overdraft. Show it on the credit (payments) side as the balancing figure in the bank column, and show cash in hand separately as positive.

Worked examples

Example 1

A sports club had cash in hand ₹5,000 and cash at bank ₹20,000 on 1 April 2024. During 2024-25 it received subscriptions ₹1,80,000, entrance fees ₹10,000 and donations ₹25,000, and sold old furniture for ₹6,000. It paid salaries ₹70,000, rent ₹36,000, sports equipment ₹40,000 and general expenses ₹14,000. Prepare the Receipts and Payments Account.

Show the solution
  1. Opening balances: cash ₹5,000 and bank ₹20,000, shown on the debit side.
  2. Receipts: subscriptions ₹1,80,000 + entrance fees ₹10,000 + donations ₹25,000 + sale of furniture ₹6,000 = ₹2,21,000.
  3. Debit total = 25,000 + 2,21,000 = ₹2,46,000.
  4. Payments: salaries ₹70,000 + rent ₹36,000 + equipment ₹40,000 + general expenses ₹14,000 = ₹1,60,000.
  5. Closing balance = 2,46,000 − 1,60,000 = ₹86,000, placed on the credit side.
  6. Credit total = 1,60,000 + 86,000 = ₹2,46,000, which agrees with the debit side.

Answer: Both sides total ₹2,46,000. The closing cash and bank balance is ₹86,000.

Example 2

A charitable trust shows the following for the year ended 31 March 2025: opening cash ₹8,000; opening bank ₹32,000; subscriptions received ₹1,20,000 (including ₹10,000 for 2023-24 and ₹6,000 for 2025-26); interest on investments received ₹9,000; salaries paid ₹55,000 (including ₹5,000 for last year); medicines purchased ₹30,000; investments purchased ₹50,000; depreciation on furniture ₹4,000; outstanding rent ₹3,000. Prepare the Receipts and Payments Account.

Show the solution
  1. Exclude depreciation ₹4,000 and outstanding rent ₹3,000 as they are non-cash.
  2. Subscriptions of ₹1,20,000 are taken in full, since cash was received in this year whatever the period it relates to.
  3. Salaries of ₹55,000 are taken in full, including ₹5,000 for last year.
  4. Debit side: opening cash ₹8,000 + opening bank ₹32,000 + subscriptions ₹1,20,000 + interest ₹9,000 = ₹1,69,000.
  5. Credit side payments: salaries ₹55,000 + medicines ₹30,000 + investments ₹50,000 = ₹1,35,000.
  6. Closing balance = 1,69,000 − 1,35,000 = ₹34,000.
  7. Credit total = 1,35,000 + 34,000 = ₹1,69,000, which matches the debit total.

Answer: Both sides total ₹1,69,000. The closing cash and bank balance is ₹34,000.

Exam tips

  • Read each item and decide first whether cash moved. If not, leave it out completely.
  • Do not split subscriptions by year in this account. Splitting is needed only in the Income and Expenditure Account.
  • Write the opening balances of cash and bank on separate lines. Examiners like to see them clearly.
  • If a question gives only the closing balance, work backwards: the closing balance is the difference between the two sides.
  • Keep a clean heading and side labels 'To' and 'By'. Neat presentation protects step marks.

Practice questions from Financial Statements of Not-for-Profit Organisations

Receipts and Payments Account: frequently asked questions

What is the format of a Receipts and Payments Account?

It is a two-sided account like a cash book summary. The debit side starts with opening cash and bank balances followed by receipts. The credit side lists payments and ends with closing cash and bank balances. Use 'To' on the receipts side and 'By' on the payments side.

What are the main features of a Receipts and Payments Account?

It is a summary of the cash book and is real in nature. It follows the cash basis and records both capital and revenue items. It starts with opening balances and ends with closing balances. It does not show surplus or deficit.

What is the difference between Receipts and Payments Account and Income and Expenditure Account?

The Receipts and Payments Account records actual cash movements, including capital items, on a cash basis. The Income and Expenditure Account records only revenue items on an accrual basis and shows surplus or deficit. The first is real in nature, the second is nominal.

Does the Receipts and Payments Account include depreciation?

No. Depreciation is a non-cash expense, so it does not appear in this account. It is charged only in the Income and Expenditure Account.