Difference between receipts and payments account and cash book

By: Rashid Javed | Updated on: October 23rd, 2021

Both cash book and receipts and payments account show the same balance of cash at the end of the year. The receipts and payments account is actually a classified form of cash book.

The two accounts can however be differentiated on the basis of the following characteristics:

Application of double entry system

Chronological recorded

  • Cash book:
    The transactions are recorded in the cash book in a chronological order (i.,e in the order in which they occur).
  • Receipts & payments a/c:
    The transactions are recorded in the receipts and payments account in a classified manner at the end of the accounting period which usually consists of one year.
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Narration

  • Cash book:
    A narration is usually written after each entry in the cash book. The use of narration is however optional.
  • Receipts & payments a/c:
    Narration is not written in receipts and payments account.

Posting reference

  • Cash book:
    A posting reference (abbreviated as PR) column is used in cash book to refer the ledger accounts to which various entries relate.
  • Receipts & payment a/c:
    Posting reference column is not used in receipts and payments account.

Ascertainment of daily or monthly cash balance

  • Cash book:
    In case of a cash book, the cashier or some other relevant person can ascertain the cash balance at the end of each day, month or another period.
  • Receipts and payment a/c:
    It is mostly prepared at the end of the period so there is no question of ascertainment of daily or monthly cash balance.

Preparation by entities

  • Cash book:
    A cash book is prepared by both trading and non-trading concerns.
  • Receipts and payments a/c:
    It is mostly prepared by non-trading concerns. Trading concerns don’t need to prepare it.

Nature of account

  • Cash book:
    The nature of cash book is like a current account in which transactions are recorded whenever they occur.
  • Receipts & payments a/c:
    Receipts and payments account is a periodical account which is prepared at the end of a certain period which is usually one year.

Importance and need

  • Cash book:
    Trading concerns maintain either a cash account or a cash book. It is a need of every business and its preparation is therefore essential.
    Receipts & payments a/c:
    It is used for preparing income and expenditure account and for other purposes. Its preparation is optional because it is not a part of the formal double entry system of non trading concerns. The income and expenditure account and balance sheet can be prepared directly from trial balance and some additional information.
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One Comment on Difference between receipts and payments account and cash book
  1. prabhas Kumar chaudhuri

    Thank you for teaching a ignorant person. Thank again

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