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Key Differences Between R&P and Income & Expenditure (I&E)Key Differences Between R&P and Income & Expenditure (I&E)

Key Differences Between R&P and I&E Accounting:

  • R&P Accounting:

    • Simpler and based directly on bank transactions.
    • Records transactions when they occur, without adjustments for timing.
    • VAT is included in the total transaction amount.

  • I&E Accounting:

    • More detailed, accounting for the timing of income and expenses.
    • For example, a £1,000 deposit received in November for a wedding next year would be recorded in the 2025/26 accounts, not 2024/25.
    • VAT is reported separately, affecting the figures in AGAR boxes.

Example of Accounting Impact:

  • In R&P Accounting:
    • If you pay a £100 invoice plus £20 VAT (£120 total), the full amount appears in Box 6.
  • In I&E Accounting:
    • Only the net amount (£100) appears in Box 6, with the VAT adjustment reflected in the other boxes.

  • This difference also impacts boxes 7 and 8:

      • In R&P, boxes 7 and 8 will always match (e.g., the bank balance).
      • In I&E, there’s usually a variance between boxes 7 and 8 due to VAT and adjustments.

Example Calculation:

  1. Starting Bank Balance: £500
  2. Payment Made: £120
    • R&P:
      • Box 7 and Box 8 both show £380 (remaining balance).
    • I&E:
      • Box 6 shows £100 (net), Box 7 shows £400 (adjusted), and Box 8 reflects the £380 bank balance (with a £20 VAT difference).