What is the Receipts and Payments Account?
The Receipts and Payments Account is a summary of a club's cash book. It records all cash receipts on the debit side and all cash payments on the credit side, just like an ordinary cash book. The opening balance (cash and bank in hand) is brought down on the debit side, and the closing balance is carried down as the closing cash balance.
Key Features
- It is on a cash basis only — only money actually received or paid is recorded.
- It includes both capital items (e.g. buying equipment) and revenue items (e.g. rent).
- It does not take account of arrears, prepayments or depreciation.
- It does not show a surplus or deficit — only the cash balance.
Example
A badminton club began the year with cash of RM400. During the year it received subscriptions of RM3,000 and donations of RM600, and paid rent of RM1,200 and bought rackets for RM500. Closing balance = RM400 + RM3,000 + RM600 − RM1,200 − RM500 = RM2,300.
| Receipts and Payments Account | |
| Balance b/d (cash) 400 | Rent 1,200 |
| Subscriptions 3,000 | Rackets bought 500 |
| Donations 600 | Balance c/d 2,300 |
| 4,000 | 4,000 |
Key idea
Closing balance = Opening balance + Total receipts − Total payments. This figure is the cash and bank carried forward to the next year.
Limitations of this Account
Although the Receipts and Payments Account is easy to prepare, it has weaknesses. It does not distinguish capital from revenue items, does not show arrears or prepayments, and ignores depreciation and bad debts. As a result it cannot show whether the club has earned a surplus or suffered a deficit. To find the club's true performance, the information from this account must be adjusted and transferred to the Income and Expenditure Account, which is prepared on an accruals basis. The Receipts and Payments Account is therefore only the starting point in preparing a club's financial statements.
Remember
This account is like a cash book — it does not separate capital and revenue items, and it does not adjust for arrears or depreciation. Those adjustments are made later in the Income and Expenditure Account.