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

Which of the following statements about the Receipts and Payments Account of a not-for-profit organisation is correct?

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. It records capital and revenue items alike on a cash basis, and it ignores non-cash items such as depreciation or outstanding expenses.

  1. AIt is a nominal account prepared on the accrual basis
  2. BIt is a summary of the cash book that begins with opening cash and bank balances and ends with closing balancesCorrect
  3. CIt shows only revenue items and excludes capital items
  4. DIt includes non-cash items such as depreciation and outstanding expenses

Explanation

The Receipts and Payments Account is a summary of the cash book. It opens with the opening cash and bank balances and closes with the closing balances. It records both capital and revenue items on a cash basis and ignores non-cash items such as depreciation and outstanding expenses, so the other options are wrong.

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