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

Which statement about the Receipts and Payments Account of an NPO is correct?

The Receipts and Payments Account summarises the cash and bank transactions of the year, beginning with opening balances and ending with closing balances. It is a real account containing capital and revenue items of any period, prepared on a cash basis, unlike the accrual-based Income and Expenditure Account.

  1. AIt is a nominal account that records only revenue items on an accrual basis
  2. BIt is a summary of the cash and bank transactions, starting with opening balances and ending with closing balancesCorrect
  3. CIt shows only outstanding and prepaid items
  4. DIt is prepared only after the Income and Expenditure Account is closed

Explanation

The Receipts and Payments Account is a real account, a summary of the cash book. It records both capital and revenue items of all periods, starting with opening cash and bank balances and ending with closing balances. Option A is wrong because it is on a cash basis, not accrual.

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