Non Trading Organizations Account

 

Receipt and Payment Account

It is a real account. The basic rule of double entries is followed to prepare this account. It is prepared from a cash book at the end of the accounting period. Every transaction regarding the cash transactions is recorded in the Cash Book in chronological order. We may say that the Receipt and Payment account is a summary of cash payments and cash receipts during the current year. if rent and salary paid on monthly basis all over the accounting period, and donation or subscription received during the current year recorded in a cash book date wise but at the end of the accounting period, the Receipt and Payment account will contain the total amount of rent paid, salary paid, subscription received and donation received. All cash a receipt will be recorded on the debit side and all cash payment will be recorded on the credit side.

Income and Expenditure Account

Income and expenditure account is a nominal

account and as an equivalent to a Profit and Loss account.

The essential features of an income and expenditure account are as follows −

Expenses and losses are recorded on the debit side of it and all incomes and gains are recorded on the credit side.

Capital income and expenditure are excluded and revenue income and expenses are included in it.

 It is based on a mercantile system of accounting, therefore, the income and expenses related to preceding years or subsequent years are excluded while preparing the income and expenditure account.

The credit balance of an income and expenditure account shows a surplus. Further, excess of income over the expenditure and the debit balance of it show deficit i.e. excess of the expenditure over income.

Only nominal accounts are considered in the preparation for this account.

 Balance Sheet

On the date on which a balance sheet is prepared, particulars of all the assets and liabilities are recorded in the same manner as we do in any other profit-making firms. Its capital fund is made up of surplus income over expenditure and other incomes capitalized in the given period of time. Sometimes, two balance sheets need to be prepared At the beginning of the accounting, year to know the opening capital fund and At the end of the financial year to know the financial position of the organization.Conversion of Receipt and Payment Account into Income and Expenditure Account

Following are the steps required to convert receipt and payment account into income & expenditure account 

 Opening balance and closing balance of a receipt and payment account representing opening cash in hand, opening cash at bank, closing cash in hand, and closing cash at the bank need to be ignored.

 Items of capital receipts and capital payment will be excluded while preparing an income and expenditure account.

 Revenue items of an income and expenditure will be considered only at the time of preparation of an income & expenditure the account from the receipt and payment account.

 All adjustments regarding the outstanding expenses, prepaid expenses, provision for bad debts, provision for depreciation, income received in advance, and income receivable will be done.

 An income and expenditure relating to the preceding year or subsequent year will be ignored, and the items only related to the current year will be considered.