A receipts and payments account is a summary of the cash book: it shows every cash and bank receipt and payment in the year. An income and expenditure account is the club’s equivalent of an income statement: it matches income and expenditure to the year and ends with a surplus or deficit. Exam questions give you the first and ask for the second.
This skill opens the clubs and societies module because every later lesson depends on knowing which statement a figure belongs in.
What is the real difference between the two?
The receipts and payments account is a record of money moving. It includes capital payments, and opening and closing cash balances. It does not adjust for amounts owed or paid in advance.
The income and expenditure account is a measure of performance. It includes only revenue items that belong to the year, adjusted for accruals and prepayments, and it adds depreciation. It leaves out capital purchases and the cash balances.
How do you convert one into the other?
- Remove the opening and closing balances. They are not income or expenditure.
- Remove capital items, such as the purchase of equipment. They go to the statement of financial position.
- Keep revenue receipts as income and revenue payments as expenditure.
- Adjust for the year using accruals, prepayments and subscriptions in arrears or advance (the next lessons cover these).
- Add depreciation of club assets as expenditure.
- Subtract total expenditure from total income to find the surplus or deficit.
Worked example
Sunrise Cycling Club gives this receipts and payments account for the year ended 31 December 2025. There are no accruals, prepayments or depreciation to consider.
| Receipts | RM | Payments | RM |
|---|---|---|---|
| Opening cash | 2,400 | Rent | 2,100 |
| Subscriptions | 5,200 | Refreshment supplies | 900 |
| Donations | 800 | Equipment purchased | 1,500 |
| Refreshment sales | 1,300 | Insurance | 600 |
| Closing cash | 4,600 | ||
| Total | 9,700 | Total | 9,700 |
Step 1, check the account: receipts of 7,300 plus opening cash of 2,400 is 9,700. Payments of 5,100 plus closing cash of 4,600 is 9,700. It balances.
Step 2, remove balances: opening cash 2,400 and closing cash 4,600 are out.
Step 3, remove capital: equipment of 1,500 is out.
Step 4, build the account:
| Income | RM |
|---|---|
| Subscriptions | 5,200 |
| Donations | 800 |
| Refreshment sales | 1,300 |
| Total income | 7,300 |
| Expenditure | RM |
|---|---|
| Rent | 2,100 |
| Refreshment supplies | 900 |
| Insurance | 600 |
| Total expenditure | 3,600 |
The surplus is 7,300 − 3,600 = RM3,700.
Check: cash rose by 4,600 − 2,400 = 2,200. The surplus of 3,700 less the equipment bought of 1,500 also gives 2,200.
The mistake to watch for
A common slip is to copy every payment across, including the equipment.
Mistaken answer: Income 7,300, expenditure 2,100 + 900 + 1,500 + 600 = 5,100, surplus 2,200.
The student ended up with the change in cash, which is not the surplus.
The correction is to ask of every line: “Is this a revenue item that belongs to this year?” Equipment is capital, so it is not expenditure. If your surplus equals the cash movement exactly, check whether you have simply copied the cash book.
Check yourself
Try these, then open each answer.
1. A club pays RM900 for a projector and RM400 for hall rent, and receives a RM250 donation. Its opening bank balance was RM1,100. Which of these four figures appear in the income and expenditure account?
Show answer
Only the hall rent (expenditure of RM400) and the donation (income of RM250). The projector is capital and the opening balance is not income or expenditure.
2. A receipts and payments account has opening cash of RM600, receipts of RM2,500 and payments of RM1,900. Find the closing cash.
Show answer
600 + 2,500 − 1,900 = RM1,200.
3. In a year a club receives subscriptions of RM4,000, pays expenses of RM2,500 and buys equipment for RM600. Nothing else happens and there are no adjustments. Find the surplus and the increase in cash.
Show answer
Surplus: 4,000 − 2,500 = RM1,500. Increase in cash: 4,000 − 2,500 − 600 = RM900. The difference is the equipment of RM600.
Where this leads next
Next, learn how to adjust subscriptions to the right period, which is the first adjustment most club questions require. The double-entry and ledger trainer lets you practise posting before you build statements, and the practice set mixes everything together.
Some students can build the statement correctly once told what to remove, yet cannot decide for themselves. Our teachers work on exactly that in online one-to-one Accounting tuition.