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Jemshah
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Asked: 2023-01-20T07:31:14+00:00 In:

Highlight four differences between a receipts and payments account and an income and expenditure account.(8 marks)November 2022

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Highlight four differences between a receipts and payments account and an income and expenditure account.(8 marks)November 2022

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    1. Purpose: The primary purpose of a receipts and payments account is to show the inflow and outflow of cash or cash equivalents during a specific period of time. The primary purpose of an income and expenditure account is to show the overall financial performance of the organization during a specific period of time by showing the revenue and expenses incurred during that period.
    2. Coverage: A receipts and payments account typically covers only cash transactions, whereas an income and expenditure account covers all types of transactions, including cash, credit, and accruals.
    3. Format: A receipts and payments account is usually presented in a simple format, with columns for cash received and cash paid. An income and expenditure account is presented in a more detailed format, with separate sections for income and expenditure, and sub-sections for different types of income and expenditure.
    4. Balance Sheet: A receipts and payments account is not included in the balance sheet, whereas an income and expenditure account is used to prepare the profit and loss statement.
    5. Time Period: A receipts and payments account is usually prepared for a shorter period of time, such as a month or quarter, whereas an income and expenditure account is usually prepared for a longer period of time, such as a year.
    6. Auditing: A receipts and payments account is usually not audited, whereas an income and expenditure account is usually audited by an external auditor to ensure the accuracy and integrity of the financial statements.
    7. Nature: A receipts and payments account is more of a cash flow statement than an income statement, whereas an income and expenditure account is more of an income statement than a cash flow statement.
    8. Taxation: A receipts and payments account is not used for taxation purpose, whereas an income and expenditure account is used to calculate the tax liability of an organization.
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