In NPO ,we prepare receipts and payments account on cash basis of accounting and income and expenditure a/c on accrual basis of accounting. Why we use two different basis of accounting for preparing the accounts ??
Dear student
Receipt and Payment Account gives a summarised picture of various receipts and payments, irrespective of whether they pertain to the current period, previous period or succeeding period or whether they are of capital or revenue nature. It may be noted that this account does not show any non cash item like depreciation.
It is prepared on this basis to know the cash inflows and outflows of the organization during the year.
On the other hand, the Income and Expenditure Account serves the same purpose as the profit and loss account of a business organisation does.
It is prepared on this basis to know the net operating result in the form of surplus (i.e. excess of income over expenditure) or deficit(i.e. excess of expenditure over income) for the current year.
Hope this information will clear your doubts about the topic.
If you have any more doubts just ask here on the forum and our experts will try to help you out as soon as possible.
Regards
Receipt and Payment Account gives a summarised picture of various receipts and payments, irrespective of whether they pertain to the current period, previous period or succeeding period or whether they are of capital or revenue nature. It may be noted that this account does not show any non cash item like depreciation.
It is prepared on this basis to know the cash inflows and outflows of the organization during the year.
On the other hand, the Income and Expenditure Account serves the same purpose as the profit and loss account of a business organisation does.
It is prepared on this basis to know the net operating result in the form of surplus (i.e. excess of income over expenditure) or deficit(i.e. excess of expenditure over income) for the current year.
Hope this information will clear your doubts about the topic.
If you have any more doubts just ask here on the forum and our experts will try to help you out as soon as possible.
Regards