Quick Summary
- Prepared by clubs, societies, schools, and other non-trading organizations
- Records actual cash and bank movements only (cash basis accounting)
- Includes both capital and revenue items unlike Income and Expenditure Account
- Always shows a debit balance (cash/bank balance) or sometimes credit balance (overdraft)
- Serves as the basis for preparing Income and Expenditure Account
What is Receipt and Payment Account?
Receipt and Payment Account is like a summary of the cashbook for non-profit organizations. Instead of recording every single cash transaction daily, organizations like sports clubs, parent-teacher associations, religious groups, and student unions use this account to show all their money movements for the year.
Think of it as a simple report that answers two questions: “How much money did we receive?” and “How much did we spend?” The account starts with the cash balance from last year, adds all money received, subtracts all money paid out, and ends with the current cash balance.
Features of Receipt and Payment Account
1. Real Account Nature
This account behaves like a real account because it deals only with cash and bank balances. It does not record transactions on credit. If your school sports club bought jerseys but has not paid yet, it will not appear in this account until actual payment is made.
2. Actual Cash Movements
Only transactions involving actual money movement are recorded. For example, depreciation of equipment does not appear here because no cash changes hands. Similarly, outstanding subscriptions (money members owe but have not paid) are excluded.
3. Capital and Revenue Items Together
Unlike the Income and Expenditure Account that separates capital and revenue items, Receipt and Payment Account records everything together. Whether the club bought a plot of land (capital) or paid electricity bills (revenue), both appear in this account as payments.
4. Period Coverage
The account covers a specific period, usually one year. For example, a youth club might prepare it from January 1 to December 31, 2024, showing all receipts and payments within those 12 months.
Format and Preparation
| Receipts (Dr.) | Amount (₦) | Payments (Cr.) | Amount (₦) |
|---|---|---|---|
| Opening Balance (Cash/Bank) | 50,000 | Salaries Paid | 120,000 |
| Subscriptions Received | 200,000 | Rent Paid | 60,000 |
| Donations Received | 80,000 | Equipment Purchased | 150,000 |
| Sale of Old Equipment | 30,000 | Stationery Paid | 15,000 |
| Fundraising Income | 100,000 | Closing Balance (Cash/Bank) | 115,000 |
| Total | 460,000 | Total | 460,000 |
Items Commonly Found
On the Receipts (Debit) Side
- Opening balance: Cash in hand and bank balance from previous period
- Subscriptions: Membership fees actually received during the period
- Donations and grants: Money gifts received from individuals or government
- Sale of assets: Money from selling old furniture, equipment, or property
- Fundraising income: Money from events like raffles, concerts, or bazaars
- Interest received: Earnings from bank deposits or investments
- Entrance fees: One-time fees paid by new members
On the Payments (Credit) Side
- Salaries and wages: Staff payments actually made during the period
- Rent and rates: Building rent and government property taxes paid
- Utilities: Electricity, water, internet bills paid
- Equipment purchased: New computers, furniture, sports gear bought
- Stationery and supplies: Paper, pens, cleaning materials paid for
- Repairs and maintenance: Money spent fixing buildings or equipment
- Closing balance: Cash in hand and bank balance at period end
Differences from Income and Expenditure Account
| Receipt and Payment Account | Income and Expenditure Account |
|---|---|
| Summary of cash book | Similar to Profit and Loss Account |
| Records actual cash movements only | Records both paid and unpaid items (accrual basis) |
| Includes capital and revenue items | Includes only revenue items |
| Shows opening and closing balances | No opening or closing balances |
| Balance represents cash/bank position | Balance shows surplus or deficit |
| Prepared first as source document | Prepared after adjustments from Receipt and Payment Account |
Practical Example
Imagine Sunshine Youth Club has these transactions for 2024:
- Started year with ₦40,000 in bank
- Received membership subscriptions: ₦180,000
- Received donation from local government: ₦100,000
- Paid secretary salary: ₦90,000
- Paid hall rent: ₦50,000
- Bought 20 plastic chairs: ₦60,000 (capital item)
- Sold old generator: ₦25,000 (capital receipt)
The Receipt and Payment Account will show all these items. Total receipts = ₦345,000 (40,000 + 180,000 + 100,000 + 25,000). Total payments = ₦200,000 (90,000 + 50,000 + 60,000). Closing balance = ₦145,000.
Common Exam Mistakes
WAEC Chief Examiner Reports Show Students Often:
- Include non-cash items: Adding depreciation or outstanding expenses which do not involve cash movement
- Confuse with Income and Expenditure: Excluding capital items like equipment purchases or asset sales
- Wrong placement: Putting receipts on credit side and payments on debit side (remember: receipts are debits, payments are credits)
- Forget opening balance: Starting the account without the previous period’s cash balance
- Cannot balance: Failing to make total debits equal total credits by calculating closing balance correctly
- Mix accrued items: Including subscriptions in arrears or advance instead of only actual cash received
Practice Questions
Multiple Choice Questions
1. Which of these items will NOT appear in Receipt and Payment Account?
- a) Donations received
- b) Depreciation of equipment
- c) Purchase of furniture
- d) Salaries paid
Answer: b) Depreciation of equipment ✓ (No cash movement involved)
2. The opening balance in Receipt and Payment Account represents:
- a) Total income from last year
- b) Cash and bank balance from previous period
- c) Surplus from Income and Expenditure Account
- d) Total assets of the organization
Answer: b) Cash and bank balance from previous period ✓
3. Receipt and Payment Account is similar to:
- a) Trading Account
- b) Profit and Loss Account
- c) Balance Sheet
- d) Summary of Cash Book
Answer: d) Summary of Cash Book ✓
4. The closing balance of Receipt and Payment Account shows:
- a) Profit or loss for the period
- b) Surplus or deficit
- c) Cash in hand and at bank at period end
- d) Total assets minus liabilities
Answer: c) Cash in hand and at bank at period end ✓
Essay/Theory Questions
Question 1: State FIVE differences between Receipt and Payment Account and Income and Expenditure Account. (10 marks – 2 marks per point)
Examiner’s Tip: Use comparative statements. Do not just list features of one account. Show how each differs from the other.
Question 2: The following information relates to Uyo Social Club for the year ended December 31, 2024:
- Cash balance January 1: ₦35,000
- Bank balance January 1: ₦120,000
- Subscriptions received: ₦250,000
- Donations received: ₦80,000
- Salaries paid: ₦150,000
- Rent paid: ₦60,000
- Equipment purchased: ₦100,000
- Sale of old furniture: ₦20,000
Required: Prepare the Receipt and Payment Account for the year. (10 marks)
Marking Scheme:
- Proper format with debit and credit sides: 2 marks
- Correct opening balances: 2 marks
- All receipts correctly placed: 2 marks
- All payments correctly placed: 2 marks
- Correct closing balance calculation: 2 marks
Question 3: Explain FOUR items that appear in Receipt and Payment Account but NOT in Income and Expenditure Account. (8 marks – 2 marks per item)
Examiner’s Tip: “Explain” means give the item AND state why it appears in one but not the other. Simply listing items gets no marks.
Memory Aid
Remember RPAs with “CASH ONLY”:
- C – Cash basis (not accrual)
- A – All items (capital and revenue)
- S – Summary of cash book
- H – Has opening and closing balances
- O – Only actual money movements
- N – No depreciation or provisions
- L – Like a real account (debit receipts, credit payments)
- Y – Year-end position shown
Related Topics
- Income and Expenditure Accounts
- Final Accounts of Non-Profit Organizations
- Cash Book and Bank Reconciliation
- Accumulated Fund and Capital Fund
- Subscriptions in Advance and Arrears