Fundamentals of Accounting · Accounting for Non-Profit Organizations

Receipts and Payments Account: Format, Features and Preparation

Updated 11 October 2026 · Fact-checked

A Receipts and Payments Account is a summary of all cash and bank receipts and payments of a non-profit organization in a period. It is a real account, like a cash book summary. Put receipts on the debit side, payments on the credit side, and balance it with the closing cash and bank balance.

Understand Receipts and Payments Account

A club, school society, hospital trust or charitable body does not run to earn profit. So it has no Profit and Loss Account in the usual sense. Instead, it starts with a simple statement of what cash came in and what cash went out. That statement is the Receipts and Payments Account.

Think of it as a summary of the cash book for the year. Every cash or bank receipt goes on the debit (left) side. Every cash or bank payment goes on the credit (right) side. The opening balance of cash and bank is on the debit side. The closing balance is the balancing figure and is carried down on the credit side.

It is a real account, because cash and bank are real assets. It records only actual cash movements. It ignores outstanding and prepaid items, accrued income and non-cash items like depreciation. It also mixes capital and revenue items together. A building bought for cash and a salary paid both appear on the payments side.

Because of these features, the account cannot show the surplus or deficit of the year. That is why a second statement, the Income and Expenditure Account, is prepared. It covers only revenue items on an accrual basis. The Receipts and Payments Account is the starting point for both that account and the Balance Sheet.

The main limitations are: it does not show the true result of the year, it mixes capital and revenue items, it ignores dues and advances, and it does not show assets and liabilities. It is also not a complete picture of the financial position.

Key rules to remember

Debit side (receipts): Opening cash + Opening bank balance + All cash and bank receipts; Include subscriptions, donations, entrance fees, sale of assets, interest received, and loans taken, in the year they are actually received.
Credit side (payments): All cash and bank payments + Closing cash + Closing bank balance; Closing balance is the balancing figure. Show cash in hand and bank separately if given.
Balancing rule: Total of debit side = Total of credit side; If a bank overdraft is the opening balance, show it on the credit side. A closing overdraft is shown on the debit side.
Cash basis: Amount shown = amount actually received or paid in the year; Do not adjust for outstanding, prepaid or accrued items in this account.

How to solve Receipts and Payments Account questions

Use this order for any Receipts and Payments Account question. It keeps every cash item in one place and helps you balance the account cleanly.

1Draw the account with Dr side headed Receipts and Cr side headed Payments. Add a column for the amount, and a particulars column.
2Write the opening cash and bank balances on the debit side. If an opening overdraft is given, put it on the credit side.
3Go through the data line by line. Tick each item as you enter it. Put cash or bank inflows on the debit side.
4Put cash or bank outflows on the credit side. Include purchase of assets and repayment of loans, since this account mixes capital and revenue.
5Ignore non-cash items such as depreciation, outstanding expenses, prepaid expenses and accrued income. They belong to the Income and Expenditure Account.
6If an item is given as a total with adjustments, work out only the cash actually received or paid in the year.
7Total both sides. Find the balancing figure and write it as closing balance on the credit side.
8Check that both totals agree and that no tick is missing in the question.

Quickest way: Tick and Post method

When to use it: Use it when the question lists many items in a single paragraph or a trial balance, and time is short.

Underline each word that signals cash movement: received, paid, collected, purchased, sold.
Mark R beside receipts and P beside payments in the margin.
Mark non-cash words like outstanding, depreciation, accrued, prepaid and write X. Do not post them.
Copy all R items to the debit side and all P items to the credit side in one pass.
Add the debit side first, add the credit side, and the difference is the closing balance.

Common mistakes in Receipts and Payments Account

Including depreciation, outstanding expenses or prepaid items in the account
Students treat it like the Income and Expenditure Account.
Fix: Remember that this account is on a cash basis. If no cash moved, the item does not appear.
Putting receipts on the credit side and payments on the debit side
They confuse it with a ledger account for an expense or income.
Fix: Treat it as a cash book summary. Cash coming in is debit and cash going out is credit.
Leaving out capital items such as purchase of furniture or sale of investments
Students think only revenue items are allowed.
Fix: Show every cash or bank movement, capital or revenue. The account does not separate them.
Adjusting subscriptions for arrears or advances
They apply accrual rules from the Income and Expenditure Account.
Fix: Use only the subscription actually received during the year. Adjustments come later in the Income and Expenditure Account.
Writing the closing balance on the debit side
They forget that the closing balance is the balancing figure of the smaller side.
Fix: Normally, receipts exceed payments, so the closing balance goes on the credit side. Check totals to confirm.
Forgetting the opening balance of bank or cash
It is mentioned in a different line of the question.
Fix: Check the opening data first and enter it before any other item.

Worked examples

Example 1

Prepare the Receipts and Payments Account of Sunrise Sports Club, Pune, for the year ended 31 March. Opening cash ₹8,000 and bank ₹22,000. Received: subscriptions ₹1,20,000, donations ₹30,000, interest on investments ₹6,000. Paid: salaries ₹48,000, rent ₹24,000, sports equipment purchased ₹40,000, printing ₹5,000.

Show the solution

Debit side: opening cash ₹8,000, opening bank ₹22,000, subscriptions ₹1,20,000, donations ₹30,000, interest ₹6,000.
Total receipts side before closing: 8,000 + 22,000 + 1,20,000 + 30,000 + 6,000 = ₹1,86,000.
Credit side: salaries ₹48,000, rent ₹24,000, equipment ₹40,000, printing ₹5,000.
Total payments: 48,000 + 24,000 + 40,000 + 5,000 = ₹1,17,000.
Closing balance = 1,86,000 − 1,17,000 = ₹69,000.
Write ₹69,000 on the credit side as closing cash and bank balance. Both sides total ₹1,86,000.

Answer: Total of both sides is ₹1,86,000. Closing cash and bank balance is ₹69,000.

Example 2

Greenfield Charitable Trust, Jaipur, has opening cash ₹5,000 and a bank overdraft of ₹12,000. During the year it received donations ₹90,000, subscriptions ₹60,000 (including ₹10,000 for the previous year) and sold old furniture for ₹7,000. It paid salaries ₹55,000 (of which ₹5,000 is for the previous year), medical supplies ₹40,000, and repaid a loan of ₹20,000. Depreciation on furniture is ₹4,000. Prepare the Receipts and Payments Account.

Show the solution

Debit side: opening cash ₹5,000, donations ₹90,000, subscriptions ₹60,000, sale of furniture ₹7,000.
Subscriptions of ₹60,000 include the previous year's ₹10,000. Show the full ₹60,000 because it was received in cash this year.
Credit side: opening bank overdraft ₹12,000, salaries ₹55,000, medical supplies ₹40,000, loan repaid ₹20,000.
Salaries of ₹55,000 are shown in full because they were paid this year.
Ignore depreciation ₹4,000. It is a non-cash item.
Debit total before closing: 5,000 + 90,000 + 60,000 + 7,000 = ₹1,62,000.
Credit total before closing: 12,000 + 55,000 + 40,000 + 20,000 = ₹1,27,000.
Closing cash and bank = 1,62,000 − 1,27,000 = ₹35,000, written on the credit side.

Answer: Both sides total ₹1,62,000. The closing cash and bank balance is ₹35,000. Depreciation is not shown.

Exam tips

Read the question for the words received and paid. Only those go into the account.
Write a short note below the account that non-cash items are excluded. It shows the examiner you know the logic.
Keep the debit side to receipts and credit to payments, with closing balance on the credit side. Total both sides and show they agree.
Learn five limitations in one line each. Short-answer questions often ask for the features or limitations.
Practise one conversion question. Many questions ask you to prepare the Income and Expenditure Account from the Receipts and Payments Account.

Practice questions from Accounting for Non-Profit Organizations

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. The debit side lists receipts, with opening cash and bank balances at the top. The credit side lists payments, with the closing balance at the bottom.

Is the Receipts and Payments Account a real, personal or nominal account?

It is a real account. It summarizes the cash and bank balances, which are assets. It follows the cash basis and has no profit or loss figure.

What are the limitations of the Receipts and Payments Account?

It does not show the surplus or deficit of the year. It mixes capital and revenue items and ignores outstanding and prepaid items. It also does not show fixed assets and liabilities.

How is it different from the Income and Expenditure Account?

The Receipts and Payments Account is a real account on cash basis and includes capital items. The Income and Expenditure Account is a nominal account on accrual basis and has only revenue items. It shows the surplus or deficit.