Fundamentals of Financial and Cost Accounting · Financial Statements of a Not-for-Profit Organisation

Receipts and Payments Account: Format and Preparation

Updated 10 October 2026 · Fact-checked

A Receipts and Payments Account is a summary of the cash book of a not-for-profit organisation for a period. Cash and bank receipts go on the debit side, payments on the credit side. It starts with opening balances and ends with closing balances. It records only actual cash items, whether capital or revenue.

Understand Receipts and Payments Account

A club, school society or charity usually does not run for profit. It keeps a cash book like any business. At the end of the year, it needs a short report of what came in and what went out. That report is the Receipts and Payments Account.

Think of it as the cash book squeezed into one page. All receipts are grouped under heads such as subscriptions, donations and interest. All payments are grouped under heads such as salaries, rent and purchase of furniture. The opening cash and bank balance is shown on the debit side. The closing balance is the balancing figure on the credit side.

It is a real account in nature, because it deals with cash, which is a real asset. It follows the cash system, so it shows only money actually received or paid. Dues, outstanding and prepaid items do not appear. It also records both capital and revenue items together. A receipt of ₹50,000 for a donation to the building fund and a receipt of ₹10,000 for subscriptions sit in the same account.

Because of this, the account cannot show profit or loss. For that, the organisation prepares the Income and Expenditure Account, which is the not-for-profit equivalent of a Profit and Loss Account. The Receipts and Payments Account is usually the starting point for that account.

The account covers the whole period, not a single date. Its balance at the end is the cash in hand and at bank, which must match the cash book.

Key formulas to remember

Debit side (Receipts): Opening cash + Opening bank + All cash and bank receipts; Bank overdraft at the start, if any, goes on the credit side.
Credit side (Payments): All cash and bank payments + Closing cash + Closing bank; Closing balance is the balancing figure that makes both sides equal. It goes on the credit side only when it is positive. A closing bank overdraft goes on the debit side.
Closing balance: Closing balance = Total receipts (with opening balance) − Total payments; Use it to find missing cash or bank balance. A negative result is a closing bank overdraft, shown on the debit side.
Nature of items: Receipts and Payments Account = Cash book summary (capital + revenue, all periods); It includes amounts relating to past and future years if cash moved in this year.

How to solve Receipts and Payments Account questions

Use this method for any question that asks you to prepare or analyse a Receipts and Payments Account.

1Write the account in two sides: 'To' items on the debit (receipts) side and 'By' items on the credit (payments) side.
2Put the opening cash in hand and cash at bank on the debit side. If there is an opening overdraft, put it on the credit side.
3List every receipt actually received in cash or bank during the year, under proper heads. Include subscriptions for any year, donations, sale of assets and loans.
4List every payment actually made during the year. Include capital payments such as purchase of furniture, and payments of past or future years' expenses.
5Ignore non-cash items such as depreciation, outstanding expenses, prepaid expenses, accrued income and credit transactions.
6Total the receipts, including the opening balances, and total the payments, before any closing balance. If receipts are more, insert the difference on the credit side as the closing cash and bank balance, the balancing figure. If total payments exceed total receipts including opening balances, the difference is a bank overdraft. Show it on the debit side as 'To Bank Overdraft (balancing figure)'.
7Check that both sides tally. Show a positive closing balance as 'By Balance c/d'.

Quickest way: Cash-only filter

When to use it: Use in MCQs that give a list of items and ask for total receipts, total payments or closing balance.

Tick only items actually paid or received in cash or by bank. Cross out depreciation, outstanding, prepaid, accrued and credit items.
Add receipts including the opening balance. Add payments.
Subtract payments from receipts to get the closing balance.
If the question gives a subscription figure for the year only, check whether it is the amount received or the Income and Expenditure figure. Use cash received only.

Common mistakes in Receipts and Payments Account

Including depreciation, outstanding expenses or prepaid expenses in the account.
Students mix it up with the Income and Expenditure Account, which follows the accrual basis.
Fix: Remember: Receipts and Payments Account is cash only. If no cash moved, the item does not appear.
Showing the opening balance on the wrong side.
Students put every opening balance on one side without checking whether it is an asset (debit) or an overdraft (credit).
Fix: Opening cash and bank balances go on the debit side. An opening bank overdraft goes on the credit side.
Leaving out capital receipts and payments, such as sale of investments or purchase of furniture.
Students think the account is only for revenue items.
Fix: This account records both capital and revenue items. Only the Income and Expenditure Account excludes capital items.
Adjusting subscriptions for outstanding or advance amounts.
Students apply year-end adjustments they use for the Income and Expenditure Account.
Fix: Show only the subscription actually received during the year, whichever year it relates to.
Treating the closing balance as profit or surplus.
Both accounts end with a balancing figure, so they look alike.
Fix: The closing balance here is cash and bank balance. Surplus or deficit comes only from the Income and Expenditure Account.
Not including the closing balance of cash and bank when totalling.
Students forget the account must balance.
Fix: Total receipts (including opening balances) and payments before the closing balance. If receipts are more, insert the balancing figure on the credit side as the closing balance. If total payments exceed total receipts including opening balances, the difference is a bank overdraft, shown on the debit side as 'To Bank Overdraft (balancing figure)'.

Worked examples

Example 1

A sports club had cash in hand ₹5,000 and bank balance ₹20,000 on 1 April 2026. During the year it received subscriptions ₹60,000, donations ₹15,000 and interest on investments ₹5,000. It paid salaries ₹30,000, rent ₹12,000 and bought sports equipment for ₹25,000. Find the closing cash and bank balance.

Show the solution

Total receipts with opening balances = 5,000 + 20,000 + 60,000 + 15,000 + 5,000 = ₹1,05,000.
Total payments = 30,000 + 12,000 + 25,000 = ₹67,000.
Closing balance = 1,05,000 − 67,000 = ₹38,000.
Equipment purchase of ₹25,000 is a capital payment but is still shown, because the account includes both capital and revenue items.

Answer: The closing cash and bank balance is ₹38,000.

Example 2

A library society started the year with cash of ₹8,000. During the year it received in cash: subscriptions ₹40,000 (includes ₹6,000 for last year and ₹4,000 for next year) and sale of old furniture ₹7,000. It paid in cash: salaries ₹24,000 (includes ₹2,000 for last year) and purchase of books ₹15,000. Find the closing cash balance.

Show the solution

Subscriptions are shown at the full cash received: ₹40,000. Past and future year portions are not separated in this account.
Total receipts = 8,000 + 40,000 + 7,000 = ₹55,000.
Total payments = 24,000 + 15,000 = ₹39,000. Salaries are shown in full at ₹24,000.
Closing cash = 55,000 − 39,000 = ₹16,000.

Answer: Closing cash balance: ₹16,000. Subscriptions appear at ₹40,000 in the account.

Exam tips

Questions often ask which item will not appear in the account. Pick depreciation, outstanding expenses or accrued income.
Expect statement-type MCQs on features. Remember: cash basis, real nature, capital and revenue both, no profit or loss.
For numerical MCQs, tick cash items first, then total. This saves time and avoids trap items.
Know the difference table by heart: nature, basis, items, opening and closing balance, and result shown.
There is no negative marking, so attempt every question. Eliminate options that show depreciation or non-cash items.

Practice questions from Financial Statements of a Not-for-Profit Organisation

Receipts and Payments Account in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Receipts and Payments Account: frequently asked questions

What is the format of a Receipts and Payments Account?

It has two sides. The debit side lists the opening cash and bank balance and all receipts. The credit side lists all payments and the closing cash and bank balance. Both sides must total the same.

What are the limitations of a Receipts and Payments Account?

It does not show profit or loss. It ignores outstanding and prepaid items, so it does not follow the accrual basis. It mixes capital and revenue items, and it does not show assets and liabilities, so the true financial position is unclear.

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

The Receipts and Payments Account is a real account based on cash and shows capital and revenue items. The Income and Expenditure Account is a nominal account based on accrual and shows only revenue items of the year. The first ends with a cash balance, the second with surplus or deficit.

Is a Receipts and Payments Account a real account or a nominal account?

It is a real account, because it summarises the cash book and deals with cash. It begins with an opening balance and ends with a closing balance, as real accounts do.