Receipts and payments vs income and expenditure accounts

Clubs, societies and other groups that serve their members, not make a profit, still keep accounts. IGCSE Accounting uses two statements for them: the receipts and payments account and the income and expenditure account. Both belong to a non-profit organisation and both end in one figure, so students often treat them as the same thing.

They are not. They are built on different foundations and answer different questions.

Two statements, two foundations

A club needs both for the same reason a trader keeps both a cash book and an income statement. One tracks money as it moves. The other measures how the organisation performed over a period.

The receipts and payments account is the first kind and is concerned only with cash. The income and expenditure account is the second kind and is concerned with the year’s activity.

Side by side they look alike, because both list money in and money out. The difference is in what each one counts.

The receipts and payments account

This account is a summary of the cash book for the period. It opens with the balance the club held at the start.

It lists every sum received and every sum paid during the year. It closes with the balance at the end.

It asks one question of every entry: did cash actually move in this period? So it treats every payment alike, whether the money bought something lasting or something used up at once.

The income and expenditure account

This is the non-profit version of an income statement. It sets the income that belongs to the period against the expenses that belong to the period. It uses the accruals basis, which counts amounts when they are earned or incurred, not when cash moves.

Its closing figure is not called profit or loss, because the club does not exist to make money. Income greater than expenditure is a surplus.

Expenditure greater than income is a deficit. Only revenue items appear here, such as everyday running costs and income from ordinary activities.

Why the two bottom lines differ

One statement counts cash and the other counts what belongs to the period, so their closing figures rarely agree. Suppose a club collects RM12,000 in members’ subscriptions during the year. The receipts and payments account records the full RM12,000, because that is the cash received.

Now suppose RM1,000 of that was paid early for next year, and members still owe RM500 for this year. (Ignore any opening balances.)

The income and expenditure account counts RM12,000 - RM1,000 + RM500 = RM11,500, the subscriptions that belong to this year. Each account correctly reports what it was built to report.

Subscriptions show it most clearly

Some members pay in advance. The cash has arrived, but the club has not yet earned it.

Other members are in arrears. They owe for a year they have already enjoyed, so the club has earned the income but received no cash.

The receipts and payments account sees only the cash. The income and expenditure account removes what was paid early and adds what is still owed, so the figure reflects the year the subscriptions belong to.

Where capital items go

Larger, lasting purchases also divide the two. Suppose a club buys equipment for RM5,000.

The whole RM5,000 leaves the bank, so the receipts and payments account shows a payment of RM5,000. The income and expenditure account does not charge the whole cost to one year.

The equipment serves the club for several years, so only its depreciation for the period appears there. When an asset is sold, the cash received is shown in full as a receipt. The income and expenditure account shows only the profit or loss on the disposal.

Which statement answers which question

The receipts and payments account answers a question about money: where did the funds come from, where did they go, and how much is left in the bank? Use it when the concern is cash.

The income and expenditure account answers a question about the year: did the club cover the cost of its activities with the income they generated? A club can end the year with more cash than it started with and still run a deficit.

It can also make a surplus while its cash falls. Each statement is the right tool only for its own question.

The same idea you already know

A receipts and payments account plays the role of a cash book summary for a sole trader. An income and expenditure account plays the role of the income statement, with a surplus instead of a profit.

The gap between them is the gap between a trader’s bank balance and the trader’s profit for the year. A club’s two statements are that familiar idea shown twice.

If your child can prepare both statements but hesitates over which figure means what, one of our teachers can trace the line between cash and performance. Club subscriptions and equipment make a clear example. Book a trial class

Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 4.3 Other payables and other receivables (page 14).