"Receipts and payments account serves as the basis for preparing the balance sheet of non-trading organisation." Justify this statement.

For the statement — The given statement is correct. Receipts and Payments Account does serve as a foundation for preparing the Balance Sheet of a non-trading organisation.

Justification:

1. The closing balances of cash in hand and cash at bank shown in the Receipts and Payments Account are directly transferred to the assets side of the Balance Sheet.
2. The Receipts and Payments Account also provides figures for items like subscriptions, donations, life membership fees, entrance fees and legacies, which (after suitable adjustments) appear in the Balance Sheet as part of the Capital Fund or as liabilities.
3. Capital expenditures recorded in the Receipts and Payments Account (such as purchase of furniture, books, sports equipment) are shown as fixed assets in the Balance Sheet.
4. The R&P Account is also used as the basis for preparing the Income and Expenditure Account, whose surplus or deficit is then transferred to the Capital Fund in the Balance Sheet.

Hence, the Receipts and Payments Account indeed serves as the basis for preparing the Balance Sheet.