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What is the main difference between Receipts and Payments Account and Income and Expenditure Account?
- a)The former is based on accrual accounting.
- b)The latter includes capital transactions.
- c)The former includes both capital and revenue transactions.
- d)The latter starts with an opening balance.
Correct answer is option 'C'. Can you explain this answer?
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What is the main difference between Receipts and Payments Account and ...
The Receipts and Payments Account includes both capital and revenue transactions, whereas the Income and Expenditure Account includes only revenue items relevant to the current period.
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What is the main difference between Receipts and Payments Account and ...
Main Difference Between Receipts and Payments Account and Income and Expenditure Account
The Receipts and Payments Account and the Income and Expenditure Account serve distinct purposes in accounting, particularly for non-profit organizations. The main difference lies in the types of transactions they record.
Receipts and Payments Account
- It is a summary of all cash transactions for a specific period.
- Includes both capital and revenue transactions.
- Records actual cash receipts and payments, irrespective of the period to which they pertain.
- It does not follow the accrual basis of accounting; hence, it reflects cash flow rather than income or expenses incurred.
Income and Expenditure Account
- This account is similar to a profit and loss statement for non-profit entities.
- It strictly includes revenue transactions related to the organization's operations.
- Focuses on the accrual accounting basis, recording income when it is earned and expenses when they are incurred, regardless of cash movement.
- Excludes capital transactions, as it aims to show the net surplus or deficit from operations.
Conclusion: Option 'C'
The correct answer is option 'C' because the Receipts and Payments Account includes both capital and revenue transactions, whereas the Income and Expenditure Account strictly focuses on revenue transactions. This distinction is crucial for understanding the financial activities of non-profit organizations and how they report their financial status.
The Receipts and Payments Account and the Income and Expenditure Account serve distinct purposes in accounting, particularly for non-profit organizations. The main difference lies in the types of transactions they record.
Receipts and Payments Account
- It is a summary of all cash transactions for a specific period.
- Includes both capital and revenue transactions.
- Records actual cash receipts and payments, irrespective of the period to which they pertain.
- It does not follow the accrual basis of accounting; hence, it reflects cash flow rather than income or expenses incurred.
Income and Expenditure Account
- This account is similar to a profit and loss statement for non-profit entities.
- It strictly includes revenue transactions related to the organization's operations.
- Focuses on the accrual accounting basis, recording income when it is earned and expenses when they are incurred, regardless of cash movement.
- Excludes capital transactions, as it aims to show the net surplus or deficit from operations.
Conclusion: Option 'C'
The correct answer is option 'C' because the Receipts and Payments Account includes both capital and revenue transactions, whereas the Income and Expenditure Account strictly focuses on revenue transactions. This distinction is crucial for understanding the financial activities of non-profit organizations and how they report their financial status.
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What is the main difference between Receipts and Payments Account and Income and Expenditure Account?a)The former is based on accrual accounting.b)The latter includes capital transactions.c)The former includes both capital and revenue transactions.d)The latter starts with an opening balance.Correct answer is option 'C'. Can you explain this answer?
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