Difference between income and expenditure account and p and l account?

Answer 1

Differences Between Receipts And Payments Account And Income And Expenditure AccountThe following are the main differences between receipts and payments account and income and expenditure account:

1. Nature

Receipts and payments account is a summary of cash transactions for a period and it is a real account. Income and expenditure account is a summary of expenditure and income like trading and profit and loss account and it is a nominal account.

2. Objective

Receipts and payments account is prepared to show cash and bank receipts and payments during the period to derive closing balance of cash and bank. Income and expenditure account is prepared to show the net result of the operation during the period to derive surplus or deficit.

3. Recording

All cash and cheque receipts are recorded on debit side of receipts and payments account where as all cash and bank payments are recorded on credit side. In income and expenditure account all expenditure of revenue nature are recorded on debit side and all incomes of revenue nature are recorded on credit side.

4. Capital And Revenue Items

There is no distinction between capital and revenue receipts and payments in receipts and payments account. All expenses and incomes of revenue nature are recorded on accrual basis in income and expenditure account.

5. Contents

Receipts and payments account contains only cash and bank transactions. Income and expenditure account contains both cash and non-cash expenses and incomes of revenue nature.

6. Balance Sheet Requirement

Receipts and payments account is not required to prepare balance sheet. Income and expenditure account is required to prepare balance sheet.

7. Adjustments

No adjustments are required in receipts and payments account. In income and expenditure account adjustments are made because it is prepared on accrual basis.