The record of cash transactions by non-trading concerns is shown in
Receipt and Payment A/c
Understanding the Financial Records of Non-Trading Concerns
Non-trading concerns, also known as non-profit organizations (NPOs), are entities established not for making profit but for providing services to their members or the public. Examples include schools, hospitals, clubs, and charitable institutions. These organizations maintain financial records to show their financial position and performance, although the statements differ from those prepared by profit-making businesses.
Recording Cash Transactions for Non-Trading Concerns
The question asks specifically about the record of cash transactions by non-trading concerns. The primary statement that summarizes all cash and bank receipts and payments during a specific accounting period for these organizations is the Receipt and Payment A/c.
The Receipt and Payment A/c is essentially a summary of the cash book. It records all cash inflows (receipts) on the debit side and all cash outflows (payments) on the credit side. It includes both revenue and capital items, unlike the Income and Expenditure Account. It starts with the opening cash and bank balance and ends with the closing cash and bank balance. This account provides a clear picture of all the cash transactions that occurred.
Comparing Relevant Accounts
Let's look at the options provided and understand why Receipt and Payment A/c is the correct answer for recording cash transactions in non-trading concerns:
| Account Type | Purpose | Type of Items Recorded | Concern Type |
|---|---|---|---|
| Receipt and Payment A/c | Summary of all cash and bank transactions for an accounting period. Shows cash position. | All cash/bank receipts and payments (revenue and capital) | Non-trading concerns |
| Income and Expenditure A/c | Shows surplus or deficit for the accounting period. Similar to Profit & Loss A/c. | Revenue income and expenditure (accrual basis) | Non-trading concerns |
| Profit and Loss A/c | Determines net profit or net loss for a trading concern. | Revenue income and expenses (accrual basis) | Trading concerns |
| Manufacturing A/c | Determines the cost of goods manufactured. | Direct and indirect manufacturing costs | Manufacturing concerns |
From the table, it is clear that the Receipt and Payment A/c is specifically designed to record all cash transactions for non-trading concerns.
Why Other Options Are Not Correct
- Income and Expenditure A/c focuses on revenue items on an accrual basis for an accounting period, not strictly cash transactions.
- Profit and Loss A/c is prepared by trading concerns, not non-trading concerns.
- Manufacturing A/c is specific to manufacturing businesses, not relevant here.
Therefore, the record that shows the cash transactions by non-trading concerns is the Receipt and Payment A/c.
Important Questions from Receipts & Payment Account
Receipts and payments account includes which of the following?
(i)All receipts and payments related to the current year.
(ii) All receipts and payments related to the previous or future year(s).
(iii) All receipts and payments irrespective of the nature (both revenue and capital).
Generally, non-profit organisations prepare which of the following?
i) Receipt and Payment Account
ii) Income and Expenditure Account
iii) Balance Sheet
Which option shows the correct accounting treatment given in the nonprofit organization accounting?
(i) Small donations - revenue receipts
(ii) Subscriptions - revenue receipts
Which of these books is not related to ' Non Trading concerns ' ?
