Advantages And Disadvantages Of Receipt And Payment Account

Merits Or Advantages Of Receipt And Payment Account

The main advantages  of preparing receipt and payment account can be pointed out as follows:

1. Proper Recording Of Cash Transactions

Receipt and payment account records all the cash and check receipts and payments occurred during the period properly.

2. Provides Summary

It provides a summary of all cash receipts and cash payments incurred during a period at a glance. 

3. Verification Of Cash Book

It helps to verify the cash book of the business firm. So, it ensures the accuracy of company's cash book.

Demerits Or Disadvantages Of Receipt And Payment Account

Major drawbacks or disadvantages of receipt and payment account can be highlighted as folows:

1. No Disclosure Of Profitability

Receipt and payment account cannot disclose accurate profitability of the firm.

2. No Accrual Basis

It does not show cash receipts and payments on accrual basis. 

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Difference Between Receipt And Payment And Income And Expenditure Account

3. No Non-cash Transactions

Receipt and payment account fails to show non-cash transactions of the firm.

4. No Surplus Or Deficiency

It records cash and check transactions of the firm but does not disclose the surplus or deficiency of the business during the period.