Commercial Applications
The Receipts and Payments Account includes both cash and non-cash transactions such as depreciation.
- True
- False
Answer
False
Reason — The Receipts and Payments Account is a summary of cash transactions only. It records all cash receipts on the debit side and all cash payments on the credit side. Non-cash transactions such as depreciation, outstanding expenses, accrued income or prepaid expenses are NOT recorded in it. Such non-cash items are recorded only in the Income and Expenditure Account, which is prepared on accrual basis.
Related Questions
Assertion (A): The Receipts and Payments Account reflects non-cash transactions such as depreciation.
Reason (R): Depreciation is a non-cash expense that affects the organization's financial position.
- A is true but R is false
- A is false but R is true
- Both A and R are true and R explains A.
- Both A and R are true but R does not explain A.
It is a summary of all incomes and expenses of the current accounting year. It is prepared to know the surplus or deficit during the accounting year.
- Receipts and Payments Account
- Income and Expenditure Account
- Balance Sheet
- None of these
It is a statement of assets and liabilities. It is prepared to judge the financial position on a particular date.
- Receipts and Payments Account
- Income and Expenditure Account
- Balance Sheet
- None of these
A charitable organization has recently sold old office furniture and purchased new sports equipment. In the Receipts and Payments Account, where would these transactions appear, and what impact would they have on the final balance?
- Sale of furniture appears on the debit side; purchase of sports equipment appears on the credit side, reducing the final balance.
- Sale of furniture appears on the credit side; purchase of sports equipment appears on the debit side, increasing the final balance.
- Both transactions appear on the debit side, reducing the final balance.
- Both transactions appear on the credit side, increasing the final balance.