Receipts and payments explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Clubs, associations, trusts and societies usually keep a cash book and prepare a receipts and payments account from it. That account is not a statement of profit, because it mixes capital and revenue and ignores what is owed or due. To show whether the organisation earned a surplus or ran a deficit, the receipts and payments account is converted into an income and expenditure account. Our guide below does the conversion on an invented club. For registration of the organisation itself, see our 12A, 80G and CSR registration service.
The receipts and payments account is a summary of the cash book: it begins with the opening cash and bank balance, lists all receipts and payments, capital and revenue alike, and ends with the closing balance. The income and expenditure account is a nominal account on the accrual basis: it holds only revenue items of the year, and its balance is a surplus or a deficit. The ICAI Technical Guide on Accounting for NPOs recommends the accrual basis for all NPOs.
The two accounts side by side
| Feature | Receipts and payments account | Income and expenditure account |
|---|---|---|
| Nature | A real account (summary of the cash book) | A nominal account |
| Starts with | Opening cash and bank balance | No opening balance |
| Items | Receipts and payments, capital and revenue | Revenue income and expenses only |
| Period | Amount received or paid in the year | Amount that relates to the year |
| Ends with | Closing cash and bank balance | Surplus or deficit |
| Non-cash items | Not shown | Depreciation, outstanding and prepaid items shown |
| Sides | Debit: receipts; credit: payments | Debit: expenses; credit: income |
What the Technical Guide says
The Technical Guide on Accounting for NPOs (Third Edition, June 2023) is ICAI guidance, not law and not an Accounting Standard. Paragraph 19 says the end product of cash basis is a statement of receipts and payments. Paragraphs 20 and 21 describe accrual accounting, where revenue and expenses are recognised in the period in which they accrue. Paragraph 23 says that NPOs registered under the Companies Act, 2013 must keep books on the accrual basis under section 128(1); paragraph 24 recommends the accrual basis for all NPOs, including non-corporate ones. Paragraph 100 says the income and expenditure account contains revenue items only, capital items are excluded, and prepaid expenses and incomes received in advance are carried to the balance sheet. Paragraph 105 says section 8 companies prepare their statements in the Schedule III formats; other NPOs should follow any format their own statute prescribes. This article describes the formats and does not reproduce them.
How to convert
- Remove the opening balance and the closing balance of cash and bank.
- Remove capital receipts and capital payments (purchase and sale of fixed assets, loans, specific fund receipts).
- Adjust each revenue item for what relates to the year: add arrears and amounts outstanding at the end, deduct advances received or prepaid, reverse any opening items that were settled this year.
- Add items that never passed through the cash book: depreciation, provisions.
- Prepare the account: income on the credit side, expenditure on the debit side, and the balance as surplus or deficit.
For the NPO-specific heads such as subscriptions in advance, life membership and funds, see our companion article on subscriptions, donations and fund-based accounting.
Worked example: Lakeview Residents Club
The entity and all figures in this example are invented for illustration.
Receipts and payments account for the year ended 31 March 2026
| Receipts | Amount | Payments | Amount |
|---|---|---|---|
| To Balance b/d (cash and bank) | 48,000 | By Salaries | 1,44,000 |
| To Subscriptions | 3,20,000 | By Electricity | 36,000 |
| To Hall hire | 36,000 | By Repairs | 22,000 |
| To Interest received | 6,000 | By Printing and stationery | 12,000 |
| To Sale of old equipment | 8,000 | By Purchase of sports equipment | 40,000 |
| By Balance c/d (cash and bank) | 1,64,000 | ||
| Total | 4,18,000 | Total | 4,18,000 |
Check: receipts 48,000 + 3,20,000 + 36,000 + 6,000 + 8,000 = 4,18,000; payments 1,44,000 + 36,000 + 22,000 + 12,000 + 40,000 + 1,64,000 = 4,18,000.
Information at the year-end.
- Subscriptions: 15,000 are due for the year but unpaid; 9,000 received during the year are for the next year. There were no opening arrears or advances.
- Salaries for March of 12,000 are unpaid.
- The March electricity bill of 4,000 is unpaid.
- The sports equipment bought during the year is depreciated at 10 per cent for the year (an assumed rate, for arithmetic only): 40,000 x 10% = 4,000. The old equipment was sold at its book value, so there is no profit or loss on the sale.
Step 1 – items removed. The opening and closing balances, the sports equipment purchase of 40,000 and the sale of old equipment of 8,000 are removed.
Step 2 – each revenue item adjusted.
| Item | Working | Amount for the year |
|---|---|---|
| Subscriptions | 3,20,000 + 15,000 arrears - 9,000 advance | 3,26,000 |
| Hall hire | As received | 36,000 |
| Interest received | As received | 6,000 |
| Salaries | 1,44,000 + 12,000 outstanding | 1,56,000 |
| Electricity | 36,000 + 4,000 outstanding | 40,000 |
| Repairs | As paid | 22,000 |
| Printing and stationery | As paid | 12,000 |
| Depreciation on sports equipment | 10% of 40,000 | 4,000 |
Step 3 – the income and expenditure account for the year ended 31 March 2026.
| Expenditure | Amount | Income | Amount |
|---|---|---|---|
| To Salaries | 1,56,000 | By Subscriptions | 3,26,000 |
| To Electricity | 40,000 | By Hall hire | 36,000 |
| To Repairs | 22,000 | By Interest received | 6,000 |
| To Printing and stationery | 12,000 | ||
| To Depreciation on sports equipment | 4,000 | ||
| To Surplus (to the general fund) | 1,34,000 | ||
| Total | 3,68,000 | Total | 3,68,000 |
Working: expenditure 1,56,000 + 40,000 + 22,000 + 12,000 + 4,000 = 2,34,000; income 3,26,000 + 36,000 + 6,000 = 3,68,000; surplus 3,68,000 - 2,34,000 = 1,34,000.
Step 4 – reconcile the surplus to the cash book.
| Particulars | Amount |
|---|---|
| Revenue receipts in cash (3,20,000 + 36,000 + 6,000) | 3,62,000 |
| Less: revenue payments in cash (1,44,000 + 36,000 + 22,000 + 12,000) | (2,14,000) |
| Net revenue cash | 1,48,000 |
| Add: subscription arrears | 15,000 |
| Less: subscriptions received in advance | (9,000) |
| Less: salaries outstanding | (12,000) |
| Less: electricity outstanding | (4,000) |
| Less: depreciation | (4,000) |
| Surplus | 1,34,000 |
Check: 1,48,000 + 15,000 - 9,000 - 12,000 - 4,000 - 4,000 = 1,34,000, which is the surplus. The cash side also proves: 48,000 + 1,48,000 net revenue cash + 8,000 sale - 40,000 purchase = 1,64,000, the closing balance.
The surplus of 1,34,000 goes to the general fund in the balance sheet, which also carries subscriptions in advance of 9,000 as a liability and subscription arrears of 15,000 as an asset. See our guide to the balance sheet of an NPO.
Common mistakes
- Treating the purchase of equipment as an expense: it is capital and goes to the balance sheet.
- Taking only the cash received as income: arrears and advances must be adjusted.
- Including the opening cash balance as income.
- Treating the surplus as cash in hand: it is an accrual figure, not the cash balance.
- Forgetting depreciation because no cash was paid.
Need help with accounts of a club or society?
If your organisation keeps only a cash book and you need accrual accounts for a trustee or member meeting, we can prepare them and review the registration position. Our 12A, 80G and CSR registration team works with trusts and societies on the compliance side.
Key takeaways
- The receipts and payments account is a cash summary; the income and expenditure account is an accrual account of revenue items.
- Capital receipts and payments are excluded from the income and expenditure account.
- Convert by removing balances and capital items, then adjusting for arrears, advances, outstanding items and depreciation.
- The result is a surplus or deficit, not a cash balance.
- A company NPO must keep accrual books (section 128(1)); the Technical Guide recommends accrual for all NPOs.
Read next
- NPO balance sheet: subscriptions, donations and funds
- Final accounts of a sole proprietor
- Cash basis of accounting: ICAI Technical Guide
- Cash book: single, double and triple column
Disclaimer: Based on the Accounting Standards issued by the Institute of Chartered Accountants of India as on 1 April 2025, the Companies (Accounting Standards) Rules, 2021 as amended up to G.S.R. 169(E) of 10 March 2026, the Companies Act, 2013 and the ICAI guidance named in the article, as consulted on 4 October 2026. The worked example uses invented figures. Later amendments should be checked on icai.org and mca.gov.in. This article is general information, not legal advice; check the official text before acting.