Receipts And Payment Account: Features And Limitations - SS2 Accounting Lesson Note
A receipts and payment account is a type of cash book that is used to record all the cash receipts and payments made by an organization during a particular period of time. The account is used to track the organization's cash flow and provide an overview of its financial position. Below is a format for receipts and payment account
|
Receipts (₦) |
Payments (₦)
Sales
Subscription
Bank loan
Balance b/d
X
X
X
XXX
XX
Purchases
Rent
Equipment
Wages and salaries
Insurance
Printing
Bank interest
Electricity bill
Bank loan repaid
General expenses
Balance c/d
X
X
X
X
X
X
X
X
X
X
XX
XXX
Features of Receipts and Payment Account
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Records all cash transactions: The receipts and payment account records all cash transactions made by the organization, including cash receipts and cash payments.
Simple format: The account is designed to be simple and easy to use, with a straightforward format that makes it easy to understand and interpret.
Shows cash balance: The account provides an up-to-date record of the organization's cash balance, which is important for managing cash flow and making financial decisions.
Useful for small organizations: Receipts and payment accounts are particularly useful for small organizations that have relatively simple financial transactions.
Limitations of Receipts and Payment Account
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Limited information: Receipts and payment accounts provide limited information on the financial position of the organization. They do not provide information on the organization's assets, liabilities, and equity.
No accrual basis: Receipts and payment accounts are not prepared on an accrual basis, which means that they do not reflect transactions that have been incurred but not yet paid for.
Not suitable for larger organizations: Receipts and payment accounts may not be suitable for larger organizations with more complex financial transactions, as they may require more detailed and comprehensive financial statements.
No information on non-cash transactions: Receipts and payment accounts only record cash transactions, which means that they do not provide information on non-cash transactions, such as transactions made using credit cards or other payment methods.