Although both Receipt and Payment Account and Cash Book record the cash transactions there also exist certain differences between the two. These differences are given below.
Difference between Receipt and Payment Account and Cash Book
|Receipts and Payments Account||Cash Book|
|Basis of Preparation||Cashbook is the main basis of its preparation.||Each cash receipt and cash payment is the basis of its preparation.|
|It can be regarded as a ‘statement’ rather than an ‘account’. Unlike ordinary accounts, it does not have Date and Ledger Folio columns.||It can be regarded as an ‘account’ as it can be used both as a journal as well as a ledger and its balances are directly shown in the Balance Sheet.|
|Period||It is a summary of the Cash Book and is prepared at the end of an accounting period.||It is prepared or maintained on daily basis.|
|Date Column||The date column is not present because it shows the summary of receipts and payments.||The date column is present as it shows detailed records of cash receipts and payments date-wise.|
|Two Sides||The two sides of this account are Receipts Side and the Payments Side.||The two sides of this account are the debit side and the credit side.|
|Objective||Its main objective is to provide a summary of all the cash transactions.||Its main objective is to provide a detailed date-wise record of each and every cash transaction.|
|Organizations||It is prepared by NPOs.||It is prepared by both NPOs as well as profit-making organizations.|
Any interest paid on capital is considered as an expense and is shown in the Profit and Loss Account. Treatment of interest on capital in the final accounts is as follows.
Treatment of interest on drawings in the final accounts is as follows. Firstly, interest in drawings is shown on the credit side of the Profit and Loss Account.
Operating Profit can be defined as the profit earned by carrying the normal business activities. It is computed by subtracting the operating expenses from the gross profit.
The balance sheet is the last financial statement that is prepared by any organization. This statement helps to ascertain the true financial position of an enterprise at the end of an accounting period
A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.
In order to incorporate adjustments in the financial statements, we pass the required Journal entries, which are termed as adjusting entries.