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

A cricket club prepares its annual statements. Which description best fits its Receipts and Payments Account?

The Receipts and Payments Account is a summary of the cash book. It opens with the cash and bank balances at the start of the year and records all actual receipts and payments, capital and revenue alike, without adjusting for accruals. It therefore does not show surplus or deficit.

  1. AA nominal account that shows only revenue income and expenditure for the year
  2. BA summary of cash and bank transactions of the year, covering both capital and revenue items, beginning with opening balancesCorrect
  3. CAn accrual-based statement that shows the surplus or deficit for the year
  4. DA statement of assets and liabilities at the end of the year

Explanation

The Receipts and Payments Account is a summary of the cash book. It starts with opening cash and bank balances and ends with closing balances, and it includes both capital and revenue items. It ignores outstanding and prepaid items, so it does not show surplus or deficit. That role belongs to the Income and Expenditure Account.

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