There are several points of difference between a receipt and payment account and an income and expenditure account. These differences fall under the following categories:

  • Nature
  • Commencement
  • Items included
  • Capital and revenue items
  • Placing of items
  • Balance of account
  • Outstanding items
  • Carrying of balance
  • Balance sheet

In the rest of this article, an overview is given of each of these areas.

Nature

Receipt and payment account: A summary of cash transactions.

Income and expenditure account: Another name for an income and expenses summary, as adopted in non-trading concerns.

Commencement

Receipt and payment account: It must start with the opening balance of cash brought over from the preceding period (if any).

Income and expenditure account: It does not start with any balance.

Items Included

Receipt and payment account: It may include receipts and payments relating to the period immediately before or after.

Income and expenditure account: It must include only income and expense items belonging to the period under review.

Capital and Revenue Items

Receipt and payment account: It includes both capital and revenue receipts and payments.

Income and expenditure account: It includes only the income and expenditures of revenue nature.

Placing of Items

Receipt and payment account: Receipts are shown on the debit side and payments on the credit side.

Income and expenditure account: If it is prepared in accounts form, all revenue appears on the credit side and expenditures on the debit side.

Balance of Account

Receipt and payment account: The difference between receipts and payments represents the balance of cash in hand or at bank (or bank overdraft at the closing date).

Income and expenditure account: The difference between income and expenditure represents either surplus or deficit balance.

Outstanding Items

Receipt and payment account: Restricted to cash transactions only and does not consider outstanding income or expenditure

Income and expenditure account: Includes all income (whether received or not) and all expenses (whether paid or not) relating to the period under review.

Carrying of Balance

Receipt and payment account: The balance of the account is carried to the next period.

Income and expenditure account: The balance of the account is not carried to the next period. Instead, it is added to or deducted from the accumulated amount.

Balance Sheet

Receipt and payment account: This account does not have to be accompanied by a balance sheet.

Income and expenditure account: This account must be accompanied by a balance sheet for the period concerned.

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True is a Certified Educator in Personal Finance (CEPF®), contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

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