1. It is a summary of cash book, like a cash book, receipts are shown on the debit side and payments on the credit side.
2. Cash
   and bank items are merged in one column. That means receipts in cash
   as- well-as by , cheque are entered in one column on debit and payments
   in cash as-well- as by cheque are entered in one column on credit side.
   Contra entries between cash and bank get eliminated.
3. It is not a part of double entry book-keeping. It is just a summary of cash book which is a , part of double entry system.
4. Just like cash book, it starts with the opening balance of cash and bank and closes with the closing balance of cash and bank.
5. Both
   revenue and capital receipts and payments are recorded in this account.
   For example, An organization that is exclusively set up to carryon with
   the object of carrying out social service or promo & organization
   of social activities, is a non- trading enterprise. payment for rent and
   payment for building and machinery both are recorded on its payments
   side. Similarly, receipts on account of subscription and machinery are
   shown on the receipts side.
6. Usually, it shows a debit balance
   which represents cash in hand and at bank. However, in case of bank
   overdraft, which is larger than cash in hand, the account will show a
   credit balance.
7. Receipts and payments account fails to disclose
   gain or loss made by the concern during the period because (a) it is
   prepared on actual receipt basis i.e. it records all
   receipts-irrespective of the period to which it relates (previous year,
   current year or future), (b) it also ignores the nature of the receipts
   and payments (whether capital or revenue). I
8. Accounting concept
   of gain or loss is based on “accrual concept” which by its very nature
   “receipts and payments account” is not capable of considering.
   Therefore, fails to disclose gain or loss (earned or suffered by the
   concern) during the period. For example, this account ignores:

1. Legacy:
   It is the amount received by the concern as per the ‘will’ of the
   ‘donor’. It appears on the receipts side of receipts and payments
   account. It should not be considered as income but should be treated as
   capital receipt i.e. credited to capital fund account.
2. Subscriptions:
   The members of the associations, as per rules, are, generally, required
   to make annual subscription to enable it to serve the purpose for which
   it was created. It appears on the receipts side of the receipts and
   payments account and is, usually, credited to income. Care must be
   exercised to take credit for only those subscriptions which are
   relevant.
3. Life membership fees: Generally, the
   members are required to make the payment in a lump sum only once which
   enables them to become the members for whole of the life. Life members
   are not required to pay the annual membership fees. As ‘life membership
   fees’ is a substitute for ‘annual membership fees’, therefore, it is
   desirable that life membership fees should be credited to a separate
   fund and fair proportion be credited to income in subsequent years. In
   the examination question, if there is no instruction as to what
   proportion be treated as income then whole of it should be treated as
   capital.
4. Entrance fees: This is also an item to
   be found on the receipts side of receipts and payments account. There
   are arguments that it should be treated as capital receipt becauseentrance fees is to be paid by every member only once (i.e. when

   enrolled as member, hence it is nonrecurring in nature. But another

   argument is that since members to be enrolled every year and receipt of

   entrance fees is a regular item, therefore, it should -be credited to

   income. In the absence of the instructions anyone of the above treatment
   may be followed but students should append a note justifying their
   treatment.

5. Sale of newspapers, periodicals, etc.:
   As the old newspapers, magazines, and periodicals etc. are to be
   disposed of every year, the receipts on account of such sale should be
   treated as income, and therefore, to be credited to income and
   expenditure account.
6. Sale of sports material:
   Sale of sports material (used) is also a regular feature of the clubs.
   Sale proceeds should be treated as income, and therefore, to be credited
   to income and expenditure account.
7. Honorarium:
   Persons may be invited to deliver lectures or artists may be invited to
   give their performance by a club (for its members). Any money, paid to
   invitees, is termed as honorarium and not salary. Such honorarium
   represents expenditure and will be debited to income and expenditure
   account.
8. Special fund: Legacies and donations
   may be received for specified purposes. As discussed above, these should
   be credited to special fund all expenses related to such fund are shown
   by way of deduction from the respective fund and not as expenditure in
   income and expenditure account.
9. Sale of old asset:
   It is a non-recurring item. It cannot be taken to income and
   expenditure account. It leads to reduction in asset. Therefore, it is
   shown by way of deduction from the concerned asset. It is important to
   note that it is the “book value” that is to be deducted from asset.
   Profit or loss in such a case is taken to income and expenditure
   account. Where the book value of asset is nil, the entire proceeds of
   sale be treated as income.
10. Specific Donations:
    These are received for specific purpose. For example: Donation for
    building; Donation for prizes; Donation for pavilion etc. These are
    capital receipts and shown on liabilities side. It is worthy to note
    that such donations should not be treated as income because if they are
    taken to income and expenditure account, it will increase income. The
    increased income may be utilized for any other purpose. Thus, the
    purpose of donation will not be served. Such donations appear on the
    liability side because they create a long term obligation (liability) on
    the institution. For example a donor may wish that prizes may be
    awarded year after year out of the income earned on his donations. Such a
    donation account can’t be closed within a year by transferring to
    income and expenditure account.
11. General donations:
    These donations are not for any specific purpose and being a recurring
    income they are to be treated as income and are shown on the income side
    of income and expenditure account.
12. Endowment fund:
    It represents donation for a specific purpose. Here, the object of the
    donor is to provide a source of permanent income to the institution.
    Thus, it is shown in the liability side of balance sheet. Any income
    earned during the year in such fund is added to it and any expenditure
    incurred during the year is deducted from it.

ACCOUNTS OF NON-PROFIT MAKING ORGANIZATIONS