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Difference between Receipt and Payment Account And Income and Expenditure Account

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  • Last Updated : 02 Aug, 2022
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An organisation that works with the motive to render services to society and not profit-making is also known as a Non-Trading Organisation. NPO is a separate legal entity and is not owned by any individual or an enterprise. Not-for-Profit Organisations maintain books of accounts following the double-entry system of accounting. Organizations with low-key operations are not in the position to maintain the books of accounts following a double-entry system of accounting, therefore, prepare a Cash Book from which Receipt & Payment A/c, Income & Expenditure A/c, and Balance Sheet are prepared to show the financial report of the organisation. 

Receipt and Payment A/c and Income & Expenditure A/c are different from each other in many ways.

Receipt and Payment A/c is a classified summary of Cash Book depicting receipts and payments under appropriate heads of accounts. Receipt and Payment A/c is a real account. It is a summary of cash receipts and cash payments. It records the transactions and events related to cash, whether it is of revenue or capital nature. Receipt and Payment A/c is prepared for a specific period, and it is not based on the accrual system of accounting. Receipt and Payment a/c is maintained on the cash system of accounting. It records all events and transactions related to receipts and payments, which are settled in cash irrespective of capital or revenue nature.

All the receipts are written on the debit side, and all the payments made are written on the credit side of the account. The opening balances of this account show Cash in Hand and Cash at Bank at the beginning of the accounting period, and the closing balances of this account show Cash in Hand and Cash at Bank at the end of the accounting period. Receipt and Payment A/c fairly depicts the cash position of the organisation.

Income and Expenditure A/c is equivalent to Profit & Loss A/c of profit earning business. It is prepared from the Trial Balance where complete sets of accounts are maintained or from Receipts & Payment A/c and other information. Income and Expenditure A/c is a nominal account and records expenses and income of revenue nature on the accrual system of accounting. It records all the income and expenses paid or not that are related to the current accounting period.

Income and Expenditure A/c is prepared at the end of the accounting period to ascertain the surplus or deficit. All the incomes which are of a revenue nature are credited, and all the expenses which are of a revenue nature are debited. Income and Expenditure A/c shows either Surplus (if the total of the credit side is more than the total of the debit side) or Deficit (if the total of the debit side is more than the total of the credit side). The surplus or the deficit of Income and Expenditure a/c is added or deducted, respectively from the Capital Fund in the Balance Sheet.

Difference between Receipt and Payment A/c and Income and Expenditure A/c:

Basis

Receipt and Payment A/c

Income and Expenditure A/c

NatureReceipt and Payment A/c is the real account. It is the classified summary of Cash Book depicting receipts and payments under different heads of accounts.Income and Expenditure A/c is the nominal account. It is the Profit and Loss A/c of Non Profit Organisation.
ObjectReceipt and Payment A/c is prepared to know the balance of Cash in Hand and Cash at Bank and the difference between the two sides denotes the Cash/Bank balance at the end.Income and Expenditure A/c is prepared to know the organisation’s position for the current year by either surplus or deficit from the net results of the activities undertaken.
FormReceipt and Payment A/c records all the receipts on the debit side and all the payments on the credit side.Income and Expenditure A/c records all expenses & losses on the debit side and all income and gains on the credit side.
Capital and Revenue Items   Receipt and Payment A/c records both capital and revenue nature items during the year.Income and Expenditure A/c records transactions of revenue nature relating to the accounting period.
BalanceReceipt and Payment A/c opening balance shows Cash in Hand and Cash at Bank, and the balance in the end, represents Cash in Hand and Cash at Bank closing balance.Income and Expenditure A/c has no opening balance, but the closing balance represents either deficit or surplus. 
PeriodReceipt and Payment A/c records receipts and payments made during the year, whether relating to preceding, current or succeeding year.Income and Expenditure A/c records transactions of the current year only.
DepreciationReceipt and Payment A/c does not includes non-cash items. E.g. Depreciation.Income and Expenditure A/c includes non-cash items. E.g. Depreciation.
AdjustmentsReceipt and Payment A/c is based on a cash system of accounting without any adjustment.Income and Expenditure A/c is based on an accrual system of accounting with adjustments.
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