Receipts and Payments Account

Explanation

The Receipts and Payments Account (RPA) is a summary of the Cash Book prepared for a non-profit organisation such as a sports club, an alumni society or a recreation club. Its main purpose is to record all cash and bank receipts (inflows) and payments (outflows) during an accounting period, and to show the closing cash and bank balances at the end of that period. Because a club does not sell goods to earn profit, it does not prepare a Trading and Profit and Loss Account like an ordinary business; instead the treasurer prepares the RPA as the first step in reporting cash movements to members.

The RPA is classified as a real account because it tracks the cash and bank assets, just like the Cash Book. The debit side of the RPA is headed 'Receipts' (Penerimaan) and records items such as the opening cash/bank balance (baki b/b), entrance fees (yuran masuk for new members), annual subscriptions (yuran langganan), donations received, proceeds from selling canteen drinks or food, collections from competitions or dinners, bank interest, and proceeds from selling old assets. The credit side is headed 'Payments' (Pembayaran) and records items such as the purchase of sports equipment and furniture, rent of a hall or premises, staff wages, competition expenses, purchase of drinks stock, utility bills (water and electricity), insurance, and the closing cash/bank balance (baki h/b).

To prepare the RPA, the treasurer begins by recording the opening cash and bank balances on the debit side (unless there is a bank overdraft, which is recorded on the credit side). All cash and cheque receipts during the period are grouped by type and entered on the debit side, while all payments are entered on the credit side. The account is then balanced: the closing cash and bank balances (baki h/b) are entered on the credit side so that both sides agree, and these closing figures are brought down as the opening balances of the next period. The difference between total receipts and total payments represents the net change in the club's cash position, not a surplus or deficit.

An important feature of the RPA is that it records only cash transactions; non-cash items such as depreciation, bad debts, subscriptions owing and accrued expenses are excluded. In addition, the RPA does not separate items by period: it records receipts and payments of the previous period, the current period and the next period together, without any adjustment. The RPA also records both capital items (for example, the purchase of sports equipment) and revenue items (for example, an electricity bill) in the same account. This is why the RPA alone cannot tell members whether the club's activities made a surplus or deficit during the year.

Students must know the main differences between the Receipts and Payments Account and the Income and Expenditure Account. The RPA is a real account that records cash only, covers both capital and revenue items, covers all periods, and ends with cash/bank balances. In contrast, the Income and Expenditure Account is a nominal account that acts like the club's Profit and Loss Account: it records only revenue income and revenue expenditure for the current period, includes non-cash items such as depreciation and adjustments for amounts owing and prepaid, excludes capital items, has no cash balances, and ends with a surplus (if income exceeds expenditure) or a deficit (if expenditure exceeds income).

Worked examples

Practice

Exam tips

Key terms

Receipts and Payments Account

A summary of a club/society's Cash Book recording all cash and bank receipts (debit) and payments (credit).

Balance b/f (balance brought forward)

The opening cash and bank balance at the start of the period, recorded on the debit side of the Receipts and Payments Account.

Subscriptions

The annual fee paid by members, which is a club's main receipt.

Real account

An account that tracks assets such as cash and bank; the Receipts and Payments Account belongs to this category.

Source: DSKP KSSM Prinsip Perakaunan Tingkatan 5

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