Income and expenditure account, as well as receipt and payment account, are the term used in the context of the preparation of books of accounts by not for profit organizations. While both terms appear to be similar there are many differences between the two, let’s look at some of the differences between income and expenditure account and receipt and payment account –
Income and Expenditure Account VS Receipt and Payment Account
Meaning
Income and Expenditure Account is the summary of income as well as expenses made by the organization during the financial year on an accrual basis and not on the cash basis, in simple words, it is similar to profit and loss account which is prepared by the companies working for profit. Whereas receipt and payment account is a summary of cash transactions done by the company during a financial year, in simple words, it is similar to cash book prepared by normal companies.
Revenue and Capital Nature
Income and expenditure account records income and expenses of revenue nature but as far as receipt and payment account is concerned it records income and expenses of revenue as well as capital nature. Besides in case of income and expenditure account adjustments with respect non-cash items like deprecation is also made which is not the case with receipt and payment account as it excludes non-cash items like deprecation altogether.
Time Period
Income and expenditure account takes into account transactions of current year only and for transactions pertaining of other years is adjusted whereas as far as receipt and payment account is concerned it records all transactions without distinguishing between transactions of the current year and other years.
Debit and Credit Side
Debit side of income and expenditure account records all expenses as well as losses done by the organization whereas credit side records all incomes as well as profits done by the organization. While the debit side of receipt and payment account records all cash receipts of the organization whereas credit side of receipt and payment account records all cash payments of the organization.
Opening and Closing Balance
In case of income and expenditure account, there will be no opening balance and as far as closing balance is concerned it represents the profit figure if credit side is more than debit side and loss figure if the debit side is more than credit side. Whereas in case of receipt and payment account there will be opening as well as closing cash balance or bank overdraft at the end of the financial year
As one can see from the above that there are many differences between income and expenditure account and receipt and payment account and that is the reason why one should be aware of the differences between the two before preparing final accounts of not for profit organizations.