Financial Accounting · Financial Statements of Not-for-Profit Organisations

Receipts and Payments Account: Format, Features and Preparation

Updated 10 October 2026 · Fact-checked

A receipts and payments account is a summary of all cash and bank receipts and payments of a not-for-profit organisation during a period. Receipts go on the left, payments on the right, opening balances are brought in, and the closing cash and bank balances balance the account. It ignores accruals and non-cash items.

Understand Receipts and Payments Account

A not-for-profit organisation, such as a club, charitable trust or society, does not aim to earn profit. Its members and donors still want to know where the money came from and where it went. The simplest answer is the receipts and payments account.

This account is a summary of the cash book. It lists every cash and bank receipt on the debit side and every cash and bank payment on the credit side for the period. It starts with the opening cash and bank balances and ends with the closing balances.

The account is a real account in nature, because it records cash and bank only. It records actual money, so it has no accruals, no outstanding or prepaid items, no depreciation and no other non-cash items. A subscription is shown when received, whatever year it belongs to. Capital and revenue items are mixed together. A purchase of furniture and a payment of salary both appear as payments.

Because of this, the account cannot show the surplus or deficit for the year. For that you prepare the Income and Expenditure Account, which follows the accrual basis. The receipts and payments account is the starting point for both the income and expenditure account and the balance sheet.

The account should be prepared on a cash basis even when the question gives extra information about outstanding items. Those details are used later, not in this account.

Key rules to remember

Balancing rule: Opening cash and bank + Total receipts during the year = Total payments during the year + Closing cash and bank; This is how you find a missing closing balance or a missing payment. Both sides must total the same.
Closing balance: Closing balance = Opening balance + Receipts − Payments; A bank overdraft is a negative balance. An opening overdraft is shown on the payments side, and a closing overdraft is shown on the receipts side as the balancing figure.
Side rule: Receipts (Dr) side: opening balances and all money received. Payments (Cr) side: all money paid and closing balances; Opening favourable cash and bank balances sit on the receipts side, and closing favourable balances sit on the payments side. Overdrafts are the reverse: an opening overdraft on the payments side and a closing overdraft on the receipts side.
Cash-basis rule: Amount shown = amount actually received or paid in the period; Ignore outstanding, prepaid and advance adjustments. Show the full amount received, even if it relates to another 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 list of cash transactions or from other data.

1Read the question and list only cash and bank transactions. Mark items such as depreciation, outstanding expenses and accrued income as non-cash and set them aside.
2Write the heading: Receipts and Payments Account of the named organisation for the year ended on the stated date.
3Put the opening cash in hand and cash at bank on the receipts side. If you are given a bank overdraft at the start, put it on the payments side.
4Enter each receipt on the left side, such as subscriptions, donations, entrance fees, sale proceeds, interest and sale of investments. Use the full amount received.
5Enter each payment on the right side, such as salaries, rent, purchases, furniture bought and investments bought. Show capital and revenue items separately and in full.
6Total both sides, find the difference, and show it as the closing cash and bank balance on the payments side. Show cash and bank separately if the question gives them separately.
7Check that both totals agree. Recheck any item that was copied wrongly if they do not.

Quickest way: Two-column tick and total method

When to use it: When the question gives a long list of transactions and time is short, and you need to make the account without errors.

Scan the list and tick only items that involve cash or bank money. Cross out depreciation, outstanding and accrued items.
Write all receipts first on the left, starting with opening balances, and tick each as you go.
Write all payments next on the right and tick each as you go.
Total the receipts side first, then the payments side without the closing balance.
Closing balance = left total − right total. Insert it on the right and check that both sides agree.

Common mistakes in Receipts and Payments Account

Including depreciation, outstanding expenses or accrued income in the account
Students mix up this account with the income and expenditure account, because both appear in the same chapter.
Fix: Ask one question for each item: did money actually move? If not, leave it out.
Adjusting subscriptions or expenses for the current year only
Students apply the accrual idea they use in final accounts.
Fix: Show the full cash received or paid, even if part of it relates to an earlier or later year.
Putting the closing balance on the receipts side or the opening balance on the payments side
Students copy the pattern from a trading account or confuse it with a ledger account.
Fix: Remember that favourable opening balances open the receipts side and favourable closing balances close the payments side. Only overdrafts go the other way.
Showing the surplus or deficit in the account
Students expect every account to give a profit figure.
Fix: The account only shows closing cash and bank. Surplus or deficit belongs in the income and expenditure account.
Mixing up bank overdraft treatment
Students treat the overdraft as a positive balance.
Fix: An opening overdraft is on the payments side. A closing overdraft is on the receipts side as the balancing figure.
Leaving out capital receipts and payments because they look unusual
Students think capital items go only in the balance sheet.
Fix: The account includes every cash movement, capital or revenue. Entrance fees, sale of assets and purchase of investments all appear.

Worked examples

Example 1

From the following, prepare the Receipts and Payments Account of Sunrise Sports Club for the year ended 31 March 2027. Opening cash ₹8,000; opening bank ₹42,000. Subscriptions received ₹1,60,000 (including ₹10,000 for 2027-28); donations ₹25,000; salaries paid ₹60,000; rent paid ₹36,000; sports equipment purchased ₹45,000; interest on investments received ₹6,000; sundry expenses paid ₹14,000. Depreciation on equipment ₹5,000 and outstanding salary ₹4,000 are also given.

Show the solution

Identify non-cash items. Depreciation ₹5,000 and outstanding salary ₹4,000 are not cash, so leave them out.
Opening balances go on the receipts side: cash ₹8,000 and bank ₹42,000.
Receipts: subscriptions ₹1,60,000 in full (advance included), donations ₹25,000, interest ₹6,000.
Total receipts including opening balances = 8,000 + 42,000 + 1,60,000 + 25,000 + 6,000 = ₹2,41,000.
Payments: salaries ₹60,000, rent ₹36,000, equipment ₹45,000, sundry expenses ₹14,000. Total = ₹1,55,000.
Closing balance = 2,41,000 − 1,55,000 = ₹86,000, shown on the payments side. This closing balance is cash and bank taken together, because the question does not split it.
Both sides total ₹2,41,000.

Answer: Receipts side: Opening cash ₹8,000; Opening bank ₹42,000; Subscriptions ₹1,60,000; Donations ₹25,000; Interest ₹6,000; Total ₹2,41,000. Payments side: Salaries ₹60,000; Rent ₹36,000; Sports equipment ₹45,000; Sundry expenses ₹14,000; Closing balance (cash and bank) ₹86,000; Total ₹2,41,000.

Example 2

The Receipts and Payments Account of Gokul Library for the year ended 31 March 2027 shows: opening cash ₹5,000, opening bank ₹20,000, subscriptions ₹90,000, donations ₹30,000, sale of old furniture ₹7,000, books purchased ₹40,000, salaries ₹48,000, electricity ₹12,000 and closing cash ₹6,000. Find the closing bank balance.

Show the solution

Receipts total = opening cash 5,000 + opening bank 20,000 + subscriptions 90,000 + donations 30,000 + furniture sale 7,000 = ₹1,52,000.
Payments before closing balances = books 40,000 + salaries 48,000 + electricity 12,000 = ₹1,00,000.
Closing cash and bank together = 1,52,000 − 1,00,000 = ₹52,000.
Closing cash is ₹6,000, so closing bank = 52,000 − 6,000 = ₹46,000.
Check: payments side = 1,00,000 + 6,000 + 46,000 = ₹1,52,000, which agrees with the receipts side.

Answer: Closing bank balance is ₹46,000. Both sides of the account total ₹1,52,000.

Exam tips

Read the question for the words cash, bank, received and paid. These tell you what goes in the account. Treat accrual words like outstanding, prepaid and accrued as traps.
Write the full heading with the organisation's name and the period. Examiners give marks for correct presentation, so keep it neat.
Show cash and bank separately when the question does, and total each side clearly so the examiner sees the check.
In MCQs, remember three facts: it is a real account, it starts with opening balances and it does not show surplus or deficit.
Questions on the difference between this account and the cash book or the income and expenditure account are common in written answers. Prepare a short point-wise comparison.

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

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 is a two-sided account like a cash book summary. The left side has opening balances and all receipts. The right side has all payments and closing balances. Both sides must total the same amount.

What are the limitations of a receipts and payments account?

It does not show the surplus or deficit for the year. It mixes capital and revenue items and ignores accruals, outstanding and prepaid items. It also does not show assets and liabilities other than cash and bank, so it cannot give a true financial position.

What is the difference between the receipts and payments account and the cash book?

The cash book records each transaction in order as it happens and is a book of original entry. The receipts and payments account is a summary of the cash book for a period and is prepared at the end. The summary groups similar items together, such as total subscriptions.

Is the receipts and payments account a real, personal or nominal account?

It is a real account, because it records cash and bank only. It follows the cash basis, so non-cash items do not appear in it.