Receipts and payments accounts
These accounts show only the money actually received or spent
in the period, with no timing adjustments. If there are any
capital receipts and payments, they are considered as income
in the period in which they occur.
Small organisations with annual income of less than £100,000
can rely on accounts based on receipts and payments, but incorporated
charities - those formed as a company - are not permitted
to prepare accounts on a receipts and payments basis, they
have to prepare full accrual
accounts.
Examples
A covenant of £75 has been received from an individual
but the tax repayment of £25 is not recovered by the
end of the financial year. In this system the covenant would
be shown as £75, but the extra £25 would not be
accounted for until it was physically received.
If a charity pays its rent in advance on the last day of
its accounting year, the receipts and payments system would
show the payment as a cost of the year in which it was paid,
despite the fact that the period covered by the payment is
the next year.
Find out more about other accounting issues and examples
in the In more depth section.
|
