Differences Between Receipts And Payment Accounts And Income And Expenditure - SS2 Accounting Lesson Note

The main difference between receipts and payment accounts and income and expenditure accounts is that receipts and payments accounts show all the cash inflows and outflows of an organization during a specific period, regardless of whether they are related to income or expenditure, while income and expenditure accounts only show the income earned and expenses incurred by the organization during the same period.

Receipts and payments accounts are cash-based accounts that record all the cash received and paid out by an organization, including cash from non-operational activities, such as the sale of an asset or receipt of a loan. The account shows the actual cash balance of the organization, which is useful for managing day-to-day cash flow.

On the other hand, income and expenditure accounts are accrual-based accounts. This means that the account may include income that has been earned but not yet received and expenses that have been incurred but not yet paid. The account shows the organization's financial performance during the period, which is useful for decision-making and financial analysis.

Thus, while receipts and payments accounts show all cash inflows and outflows of an organization, income and expenditure accounts only show the income earned and expenses incurred during a specific period. Receipts and payments accounts are cash-based, while income and expenditure accounts are accrual-based.