Lesson Notes By Weeks and Term - Senior Secondary 2

Term: 1^st Term

Week: 6

Class: Senior Secondary School 2

Age: 16 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Financial accounting

Topic:-       Account for non-profit making organization

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

1. Define receipts and payment accounts
2. Outline the features, limitations and formats of receipts and payment account
3. Prepare a receipts and payment account

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION	TEACHER’S ACTIVITY	STUDENT’S ACTIVITY
STEP 1 INTRODUCTION	The teacher reviews the previous lesson on manufacturing account	Students pay attention
STEP 2 EXPLANATION	She explains receipts and payment account and outlines its features, limitations and format	Students pay attention and participates
STEP 3 DEMONSTRATION	She shows the learners how to prepare a receipts and payment account	Students pay attention and participate
STEP 4 NOTE TAKING	The teacher writes a summarized note on the board	The students copy the note in their books

 

NOTE

ACCOUNT FOR NON-PROFIT MAKING ORGANIZATION

RECEIPT AND PAYMENT ACCOUNT FOR NOT FOR PROFIT ORGANISATION

Receipt & Payment A/C is a real account, which records cash transactions

and events of a Not for Profit Organisation. It is a classified summary of

Cash Book maintained on cash basis of accounting categorising receipts

and payments under appropriate heads of accounts. Receipt & Payment

A/c records receipts and payments which are settled in cash of both capital

and revenue nature or whether it relates to the current year, previous year

or next year. It is prepared for a specific period and it is not based on the

accrual system of accounting, i.e., it does not include expenses or income

on an accrual basis.

All the receipts are written on the debit side, and all the payments made are

written on the credit side of the account. The opening balances of this

account show Cash in Hand and Cash at Bank at the beginning of the

accounting period, and the closing balances of this account show Cash in

Hand and Cash at Bank at the end of the accounting period. Receipt and

Payment A/c fairly depicts the position of cash of an organisation. 

 

FEATURES OF RECEIPT AND PAYMENT ACCOUNT: 

1. Nature: Receipt & Payment A/c is a real account. It is a classified

summary of cash receipts and cash payments.

2. Basis of Recording:All the transactions and events settled in cash are

recorded on a cash basis of accounting.

3. Recording of Transactions:It records transactions and events of both

capital and revenue nature and does not distinguish between capital

receipts or payments or revenue receipts and payments.

4. Period: Receipt & Payment A/c is prepared for a specific period, i.e., for

a month or a year. It includes cash and bank transactions without

distinguishing among current, previous or succeeding accounting periods.

5. Adjustments: Receipt & Payment A/c is not based on an accrual

system of accounting, i.e., only transactions related to cash are recorded.

6. Purpose:Receipt & Payment A/c is prepared to have a fair idea about

the cash position of the organisation. This account show the opening and

closing balances of cash in hand and cash at bank for the accounting

period.

 

STEPS IN THE PREPARATION OF RECEIPT AND PAYMENT ACCOUNT:

Step 1: Opening balances of the cash at bank and cash in hand is written

on the receipt side, i.e., credit side of this account. In case, there is a bank

overdraft at the beginning of the year then, it is written on the payment side,

i.e., credit side of this account to start with.

Step 2: All the transactions and events related to cash or bank which are

received, i.e. receipts received in favour of the organisation are written on

the debit side of this account irrespective of capital or revenue nature.

Step 3: All the transactions and events related to cash or bank payments

made by the organisation are written on the credit side of this account,

irrespective of capital or revenue nature. 

Step 4: No accrued incomes or outstanding expenses are considered in

this account, as they do not generate any inflow or outflow of cash. 

Step 5: Now, both the sides are compared and the difference that arises

thereon is written as a closing balance of cash in hand, and cash at bank

on the credit side, i.e., payment side of this account.

 

FORMAT OF RECEIPT AND PAYMENT A/C:

* represents that the Receipt and Payment A/c will either have a positive or

negative balance of Cash at Bank, i.e., when the receipt side is greater

than the payment side, the difference is denoted as a positive balance of

Cash at Bank, and when the payment side is more than the receipt side,

the difference is denoted as Bank Overdraft or a negative balance of Cash

at Bank. 

 

DIFFERENCE BETWEEN RECEIPT & PAYMENT A/C AND CASH

BOOK:

Basis	Receipts & Payments	Cash Book
Recording	Receipt & Payments is a classified summary of Cash Book. The transactions and events which have been settled in cash are recorded.	Cash Book records each receipt and payment.
Period	Receipts & Payments is prepared at the end of accounting year.	Cash Book records the transaction on daily basis.
Date	In Receipts & Payments A/c, dates are not recorded.	In Cash Book transactions are recorded date wise.
Ledger Folio	There is no column of Ledger Folio.	There is a separate column of Ledger Folio.
Entity	Receipts & Payments Is prepared by a Non ProfitOrganisation.	Cash Book is generally prepared by any commercial organisation.
Format of Account	In Receipts & Payments A/c, all the receipts are Written on the debit Side and all the Payments made are .	Cash Book has debit and credit side with date, particulars, cash and bank amount column and has ledger folio columns.

 

Examples

From the following information, prepare a Receipts and Payment account

of Nisha Foundation for the year ended 31st March,2021:

 

1. Balance at the beginning of the year:  

• Cash in Hand $5,500
• Cash at Bank $24,000

2. Subscription for the year $92,000.
3. Petty Cash Payment of $870.
4. Sundry Expenses:
5. a) Printing & Stationery expenses $2,300.
6. b) Advertisement expenses $1,700.
7. c) Audit fees $10,500.
8. Purchase of furniture $21,000.
9. Sale of old newspaper $1,200.
10. Entrance fees received $80,000.
11. Donation received from Mr. Rajesh Kumar for building $30,000.
12. Insurance paid $37,000.
13. Taxes paid by the organisation $1,400.
14. Closing balance of Cash in Hand for the year 31st March,2021 was

$7,000. Find the closing balance of Cash at Bank also.

 

SOLUTION:

 

EVALUATION:    1. Define receipts and payment account in non-profit making organization

2. State the features of a receipts and payment account in non-profit making organization
3. Differentiate between receipts and payment account and cash book
4. Discuss the format/layout for receipts and payment account

From the following information of GG Organisation, calculate cash at bank

at the end of the year and prepare Receipts and Payment Account for the

year ending 2021-22:

1. Balance at the beginning of the year,1-4-2021:

• Cash at Bank $43,200
• Cash in Hand $17,940

2. Subscriptions received $6,750
3. Sundry payments:

• Rent and Taxes $1,900
• Printing and Stationery $3,160
• Salaries $14,700

4. Sundry receipts:

• Interest on Investment $5,500
• Sale of Furniture $11,400
• Bank Interest $800

5. Entrance fees received for the year 2021-22 $9,700
6. Balance at the end of the year,31-3-2022:

• Cash at Bank ?
• Cash in Hand $21,870

                                                6.

From the following information of GFG Club, prepare Receipts and

Payment Account for the year ending on 31st March, 2022. Cash at Bank

at the year end was $1,97,300. Find Cash in Hand at the year ending:

1. Balance on 1st April,2021:

• Cash at Bank $83,200
• Cash in Hand $27,000

2. Subscriptions received $64,200 (including $11,100 for 2020-21 and $16,300 for 2022-23)
3. Special Subscriptions for Governor’s Party $49,000
4. Sundry Receipts:

• Locker rent $31,500
• Sale of Old Newspapers $1,750
• Profit from Entertainment $22,800
• Rent realized from Club Hall $35,500
• Interest received from Investment $8,000

5. Sundry Payments:

• Salaries $28,000 ($6,500 includes for 2020-21)
• Postage and Stationery $2,020
• Electricity charges $1,765
• Purchase of Library Books $30,200
• Expenses on Dance and Socials $1,980

6. Life Membership Fees $12,630 and Entrance fees $1,590 of the club
7. Investments purchased by the Organisation worth $20,000 
8. Honorarium paid by the Organisation $3,050

 

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively