finance accounts - iced

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Finance accounts Finance accounts in Indian Railways are the statement of receipts and expenditure duly supported by a number of schedules in a financial year. Some statements (Block accounts, Capital at charge etc.) contains expenditure since beginning. Schedule contains information of expenditure shown in statement of receipts & expenditure of the financial year. Different schedules for revenue and capital receipts as well as revenue and capital expenditure are prepared. Qualities of financial accounting Financial accounting is the preparation of financial statements that can be consumed by the public and the relevant stakeholders. When producing financial statements, they must comply to the following:

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Page 1: Finance Accounts - iCED

Finance accounts• Finance accounts in Indian Railways are the statement of receipts and

expenditure duly supported by a number of schedules in a financial year.Some statements (Block accounts, Capital at charge etc.) containsexpenditure since beginning.

• Schedule contains information of expenditure shown in statement ofreceipts & expenditure of the financial year.

• Different schedules for revenue and capital receipts as well as revenue andcapital expenditure are prepared.

Qualities of financial accounting

• Financial accounting is the preparation of financial statements that can be consumed by the public and the relevant stakeholders. When producing financial statements, they must comply to the following:

Page 2: Finance Accounts - iCED

• Relevance: accounting which is decision-specific. It must be possible foraccounting information to influence decisions. Unless this characteristic ispresent, there is no point in cluttering statements.

• Materiality: information is material if its omission or misstatement couldinfluence the economic decisions of users taken on the basis of thefinancial statements.

• Reliability: accounting must be free from significant error or bias. It shouldbe capable to be relied upon by management. Often information that ishighly relevant isn’t very reliable, and vice-versa.

• Understandability: accounting reports should be expressed as clearly aspossible and should be understood by those at whom the information isaimed.

• Comparability: financial reports from different periods should becomparable with one another in order to derive meaningful conclusionsabout the trends in an entity’s financial performance and position overtime. Comparability can be ensured by applying the same accountingpolicies over time.

Page 3: Finance Accounts - iCED

• Account current: revenue andworks expenditure and revenue &capital receipts

• Railway Revenue receipts

• Capital at charge Statement

• Debt head Report

• Statement of transfer withoutfinancial adjustment

• Block Account

• Profit and Loss Account

• Balance Sheet

• Operating ratio

• Depreciation Reserve fund Account

• Development fund Account

• Accident Compensation Safety andPassenger Amenities Fund Account

• Results of Stock Verification andRevaluation of Stores

• Statement of income tax/ service tax

• Statement of calculation of dividendpayable and subsidy due fromGeneral Revenue

• Statement of loans and advancegranted to cooperative societies

Finance Accounts statements

Page 4: Finance Accounts - iCED

Finance Accounts statements contd..• Statement showing Major head wise Details of Pay and Allowances

• Details of Working Expenses by Minor head

• Statement showing details of Loans and Advances granted to Co-operative Societies under Head 6425 - Loans for Co-operative

• Statement showing Investment of Central Government (Railways) in shares of Railway men's Consumer Co-operative Societies etc.

• Statement showing Guarantees given by Union Govt. under Article292 of the Constitution of India

• Statement showing investment of Central Govt. (Railways) in shares of Statutory Corporations, Public Sector Undertakings etc.

Page 5: Finance Accounts - iCED

Thanks

Page 6: Finance Accounts - iCED

Account current• 324. A-I–An Account Current is simply a statement showing the receipts

and disbursements of an accounts circle, duly classified under theprescribed heads of account. The principle on which the Account Current isprepared is that all entries should be shown net, i. e., after deduction ofthe write back adjustments, against each head of account. On no accountshould minus results be transferred as plus result to the opposite side ofthe account. The column “account to date” in the Accounts Current formsshould show the transactions from the beginning of the official year, theeach balances should be opening balance of the year and the closingbalance of the month to which the account refers. For differentiatingrevenue & Capital transaction separate accounts namely Revenue & CapitalAccount current is prepared. It contains separate data of transactionrelated to Strategic & commercial lines.

• This is basically a cash flow statement under various heads of accounts.

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Page 7: Finance Accounts - iCED

Revenue Account Current• 325 A-I-The monthly Revenue Account Current should be prepared as in

Appendix XI. The prior approval of the Railway Board is necessary for theomission or addition of a major or a minor head in this form. Railwayadministrations may, however, introduce sub and detailed head in this formRailway administrations may, however, introduce sub and detailed heads tomeet local requirements.

• 326. The monthly Revenue Account Current should be accompanied by theschedules listed in the form (Appendix XI) in support of the transactionsshown against the various heads in the account current.

• Schedule should contain (1) expenditure ( including credit) for each grant,(ii) revenue- income tax/ service tax (iii) payment & recovery of loan &advance made to employees (iv)

• 0020, 0021 (income tax), 0044 (s/tax), 2016- Audit, 1001- Misc. receipts,1002- Commercial line receipts, 1003- strategic line receipts, 3001- IRpolicy formulation, Misc. expenditure, 3002- Commercial line revenueexpenditure, 3003- strategic line revenue expenditure, 7610- loan to Govtservants, 8009- PF, 8011- GIS,

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Page 8: Finance Accounts - iCED

Capital Account Current• 329 A-I –The monthly Capital Account Current of Open Lines and of New

Constructions should be prepared as in Appendix XII. The rule laid down inparagraph 325 is equally applicable to this form.

• schedules.-The monthly Capital Account Current should be accompaniedby the following schedules in support of the transactions shown against thevarious heads in the account current.

• Schedule of credits and debits to Transfer Railways. • Schedule of Deposits with “Reserve Bank”. • Schedule of expenditure under 5002 Capital Outlay on Indian Railways-

Commercial. (G.16)• Schedule of expenditure under 5003 Capital Outlay on Indian Railways-

Strategic. (G.16)• Schedule of Expenditure on New Construction Accounts which are

maintained by the Financial Adviser and Chief Accounts Officer of an OpenLine Railway separately for each construction with a summary there of.

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Page 9: Finance Accounts - iCED

Revenue receipts-• It contains earning of Railways duly classified as Earning from Coaching traffic,

goods traffic, sundry other earning and suspense in terms of CommercialLines MH 3002 and 3003- strategic lines wise.

• Abstract X - Earning from Coaching traffic is complied under minor head i.e.passenger fare (military passenger)/ live stock, train, luggage ticket, parcel,live stock by passenger train, postal mail, misc. receipts- penalty levied forirregular travelling, demurrage on parcel/ luggage, PF tickets etc. Refund isdeducted.

• Abstract Y- Earning from goods traffic is complied under minor head i.e. Fuel,general merchandise (container), military traffic (including live stock), livestock, Railway material, demurrage, wharfage etc.

• Abstract Z- Sundry earning is complied under minor head rent, catering deptt,sale proceeds of unclaimed goods, grass/ trees, advertisement fee, interest &maintenance charges of Rolling stock of private bodies, diet charges, RRC,operating loss on strategic lines

• Traffic suspense (demands recoverable)

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Page 10: Finance Accounts - iCED

Capital at charge• Railway expenditure is financed from (loan) Capital provided by the General

Revenues, Railway Funds and Current Revenues. Accordingly, the expenditureis allocated to (i) 'Capital', (ii) DRF (iii)DF (iv) ACSPF (v) OLWR (Revenue) and(vi) Ordinary Revenue.

• Capital at charge exhibits annual net expenditure made for asset acquisition/replacement from the source Capital granted by General Revenue.

• It is divided in 27 minor heads which include New Lines, GC, Doubling,Computerisation, staff quarters, passenger amenities, staff amenities, storesetc.

• Dividend is payable on net expenditure at percentage fixed by the RailwayConvention Committee. The RCC allowed a moratorium on payment ofdividend on investments in New Lines during the period of construction andthe first five years after opening of the line for traffic. Cumulative dividendwas payable when the line showed surplus after discharging current liability.The account of dividend liability is closed after 20 years, extinguishing all suchunliquidated liability (This is a subsidy element from General Revenues toRailways).

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Page 11: Finance Accounts - iCED

DHR (748 to 752- F-I)• The report is based on an analysis of the various balances. The report

should, besides generally review the outstanding balances, furnishexplanations for important variations from the previous year'sbalances and comments on the efficiency of the balances at the endof the year under review. .

• Certificates by the Accounts Officer.-The certificates should befurnished by the FA&CAO on the Debt head Report :-

• Regarding-"I-Small savings & provident Fund"-Provident FundBalances, Regarding "K-Deposits and Advances"- (i) Deposits (ii) Cash,Regarding "F-Loans & Advances-Loans by the Central Government“,Regarding "M-Remittances-inter-Government adjustment accounts-Accounts with States“ & General.- Certified that the balances shownin the Report agree with the General books and are supported bydetails.

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Page 12: Finance Accounts - iCED

TWFA• Transfer without financial adjustment indicate balances or asset transferred

from one accounting unit to another unit. No financial adjustment (Dr/ Cr)is made. These get cancelled at the Railway Board.

• Figures of the statement matches with the schedule of works expenditure.

• If the corrections, or transfers affect capital major heads, unless they affectthe accounts of different Governments or represent readjustment of lessimportant misclassifications of a previous year, they should usually beeffected by altering the progressive figure of capital outlay withoutfinancial adjustment i.e. , without passing the debit and credit entriesthrough the accounts of the year’s financial transactions. This wouldprevent unnecessary inflation of the current year's accounts and the votingof grants which the inclusion of the correcting entries in the currentaccounts would otherwise involve.

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Page 13: Finance Accounts - iCED

Block Account (428- 29- FI)• The Block Account represents all the physical assets of the

undertaking whether financed from loan capital or the Railways’ owngeneration of funds. It is maintained separately for commercial andstrategic lines and includes-expenditure on Capital Account; DF; DRF,SF, ACSPF, including 'new minor works' relating only to creation ofnew assets improvement in the assets replaced;

• expenditure on any assets which have come to railways withoutfinancial adjustment or from a source not covered by the above-mentioned.

• Form 429- in terms of minor head: New lines, GC, Doubling, Trafficfacilities-Yard remodeling and others, Rolling stock, Track renewals,Bridge works, S&T works, Electrification projects, other Electricalworks, Machinery and Plant, Staff quarters, computerisarion,Workshops etc.

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Page 14: Finance Accounts - iCED

Depreciation Reserve Fund- (709-F-I)

• debited by

• cost of replacements and renewals including the cost of dismantling, handling and shifting

• cost at debit of capital or Development Fund of an asset (other than land) which is abandoned or disposed of without being replaced;

• all expenditure incurred on modernization of Rolling Stock

• cost of tools and plant specially purchased, and of any posts specially created for the supervision or construction of a work

• credited with

• the amount contributed annually from the Railway Revenues;

• amount realized from the disposal of an asset the original cost (cost at debit of Capital or Development Fund or Accident compensation Safety and Passenger amenities Fund) of which is more than Rs. 5,000 and the amount realized from the disposal of materials released from a work replaced at the cost of the Depreciation Reserve Fund; and

• the amount of interest earned on the balance of the Fund.back

Page 15: Finance Accounts - iCED

Development Fund (711- F-I)• bears-

• the cost of new works relating to amenities for passengers and other railway usersfailing within one or more of the categories in the list in Note 2 (A) below,irrespective of any monetary limit.

• the full cost of replacement of a work, where the original cost was charged to revenue, being within the new minor works limit;

• the cost of all new labour welfare works including additions to existing or new works

• entire cost of works costing more than Rs.10 lakh each which are necessary, but unremunerative, for improvement of operational efficiency including addition to existing or new works;

• cost of any tools and plant specifically purchased and of any posts specially createdfor the supervision or construction of a work;

• Credited with

• amount transferred from the Revenue Reserve Fund; (2) amounts appropriated to it each year from the surplus or otherwise, (3) Interest on fund balance, (4) cost at debit of the Development Fund of an asset which is abandoned or disposed of without being replaced;

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Page 16: Finance Accounts - iCED

Accident Compensation, Safety and passenger Amenities Fund (714-F-I)

• It bears

• liability on account of compensation payment in respect of passengersinvolved in railway accidents ;

• expenditure on items of safety works: track circuiting or axle counters, automatic warning system, vigilance control device etc.

• expenditure on the items of passenger amenity and allied works like PF, train indicator boards etc.

• credited with-

• cost at the debit of this Fund of an asset which is abandoned or disposed of without being replaced;

• cost of the replaced asset; and

• amount of interest earned on the balance of the Fund.

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Page 17: Finance Accounts - iCED

Operating Ratio (434-F-I)

• A statement showing percentage of working expenses to earnings in respect of the entire system indicates operating ratio. This statement should contain brief notes explaining the variation in the percentage for the year as compared with that for the previous year. The percentage should be worked out on the following basis.-

• (a)Total Gross Earnings – total earning excluding suspense

• (b) Total Gross Working Expenses- total ordinary working expenditure (3 to 13 excluding suspense) plus appropriation to DRF & Pension Fund

• Percentage = (b) x 100/ (a).

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Page 18: Finance Accounts - iCED

Profit &Loss a/c

• Debit side contains expenditure- working expense (3002 & 3003) to 13), Cost of Railway Board (01) survey, Audit, Misc. charge, cost of RRB etc. (3001),, OLWR (part of 5002/ 5003) and Dividend payable to GR (G.15)

• Credit side contains Gross earning (1002 & 1003), Misc Receipts (1001), subsidy from General revenue towards relief and other concession.

• Difference of debit & credit side is loss/ profit

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Page 19: Finance Accounts - iCED

Balance sheet

• Liabilities side contains Total Investment as per Block account, sundrycreditors: PF & other fund balances, SD of contractor/ staff, unpaidwages, Remmitance Into Bank, Reserve bank of India, Cheque & bills,PAO/ AG/ PSB suspense, Demands payable, DRF, DF, Pension Fund,Balance of loans/ advance to Govt servant, balance of amount inaccount with Govt. etc

• Asset side contains Fixed & floating assets as per Block account, cashin hand, sundry debtors: F-loan & advance employees, Depttadvances, Traffic accounts, demands recoverable, Misc advance(Revenue), accounts with states, accounts with Pakistan Railways,Accounts with Defence, balance of amount in account with Govt. etc

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Page 20: Finance Accounts - iCED

Major head wise exp. On pay

• Object of expenditure- salary, wages, DA, HRA, CCA, PLB, TPA, KMA,OT, Transfer, CEA & Tuition Fee, Arrear of Pay & allowance

• working expense :MH 3001- Cost of Railway Board, survey, Audit, Misc. charge, cost of RRB, RDSO, RCT etc.

• working expense (MH 3002 & 3003) Grant N0. 3 to 13

• Primary unit- PU = “01" .OR. PU = “02" .OR. PU = “03" .OR. PU = “04" .OR. PU = “05" .OR. PU = “07" .OR. PU = “09" .OR. PU = "11" .OR. PU = "12" .OR. PU = "13" .OR. PU = "42" .OR.PU = "43" .OR. PU = "44"

• Capital Expenditure MH 5002/ 5003

• PU = "1" .OR. PU = “2" .OR. PU = "25" .OR. PU = "26"

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Page 21: Finance Accounts - iCED

Minor head wise working exp.

• Grant No. 03 to 13 workingexpenditure

• Minor head

• 03-100 to 900,

• 04- 100 to 700, , 900

• 05-100 to 600 , 900

• 06-100 to 700 , 900

• 07 100 to 800 , 900

• 08 100 to 800 , 900

• 09 100 to 700 , 900

• 10 100 to 300 , 900

• 11 to 100 to 600 , 900

• 12 100 to 700 , 900

• 13 100 to 800, 900

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