Fundamentals of Government Accounting

S. SATHYAMOORTHY

Independent Consultant &

Former Deputy CAG of India

Taxes 3 DimensionalConsolidated

Fund ofIndia Development Exp

Social,Economic,&General Sectors

Both as Capital & Revenue Exp

&flows of loansAnd interest

Borrowings

Internal

External

Fees,etc

Interest

Dividends

Grants

ContingencyFund of India

Other Public Moneys

PublicAccount

1

2

3

Basis of Govt Accounting

• Generally Cash basis and not accrual basis– No Profit motive– Based on Receipts

• Period– 1 year April - March

• Currency– INR.

System of Accounting

• Single Entry

• Double Entry

Classification of Transactions

Receipts Payments

Constitutional Developmental

VotedCharged

RevenueCapital

PlanNon Plan

Longevity

Classification Types

• Functional Classification

• Economic Classification

• Economic & Functional Classification

• To generate Government Financial Statistics in consonance with IMF requirements

Functional Classification

• Government Accounting Rules 1990

• List of Major & Minor Heads of Account for Union & States

Functional Classification

• Should have closer reference to

– the purpose of the transactions

• than

– the department which incurs it.

• Rule 30 of the Government Accounting Rules

Consolidated Fund of India

• Division

• Section

• Sector

• Sub sector– Sub-Sub Sector

Consolidated Fund

Revenue Other than Revenue

Receipts Expenditure Capital Public Debt

Loans & Advances

Receipts ExpenditureAppropriations to Contingency Fund

Public Account

• Public Moneys like Trust Funds

• Moneys set aside out of Consolidated Fund

• Cash Balances

• Miscellaneous

Public Account ….2• Small Savings & PF

• Trusts & Endowments

• Reserve Funds– Bearing interest– Not bearing interest

• Deposits– Bearing Interest– Not bearing interest

• Advances

Public Account …3

• Suspense & Miscellaneous– Suspense Accounts– Coinage Accounts– Miscellaneous

• Remittances

• Inter-State Settlement

• Reserve Bank Deposits

• Cash Balance

Object Heads

Personnel Services & Benefits

Administrative Expenses

Contractual Services & Supplies

Other Expenditure

Acquisition of Capital Assets

Accounting Adjustments

Grants, etc

Class of Objects

1

2

3

4

5

6

7

OBJECT CLASS 1PERSONNEL SERVICES AND

BENEFITS

• Salaries

• Wages

• Overtime allowance

• Pensionary Charges

• Rewards

OBJECT CLASS 2ADMINISTRATIVE EXPENSES

• Domestic travel expenses• Foreign travel expenses• Office Expenses• Rents, Rates and Taxes• Royalty• Publication• Other Administrative expenses

OBJECT CLASS 3CONTRACTUAL SERVICES AND

SUPPLIES

• Supplies and Materials

• Arms and Amunition

• Cost of ration

• P.O.L.

• Clothing and Tentage

• Advertising and Publicity

• Minor Works

• Professional Services

• Other Contractual Services

OBJECT CLASS 4GRANTS ETC

• Grants-in-Aid

• Contributions

• Subsidies

• Scholarships/Stipend

OBJECT CLASS 5 OTHER EXPENDITURE

• Secret Service expenditure

• Lump Sum Provision

• Suspense

• Exchange Variations

• Interest

• Share of taxes/duties

• Other Charges

OBJECT CLASS 6ACQUISITION of CAPITAL ASSETS, etc

• Motor Vehicles• Machinery & Equipment• Major Works• Investments• Loans & Advances• Repayment of borrowings• Other Capital Expenditure

OBJECT CLASS 7ACCOUNTING ADJUSTMENTS

• Depreciation

• Reserves

• Inter-Account Transfer

• Write off/losses

• Deduct recoveries

Health WelfareEducation

DDOs at Nagpur

Treasury Office

NagpurPayment

AG, MaharashtraAccounts

DDOs at Nagpur

C G A

Health WelfareEducation

PAO

Health

PAO

Education

PAO

Welfare

PrAO

Health

PrAO

Education

PrAO

Welfare

Pay & A/cs

Consolidation

Consolidation

State Govts

System

GoIDepartmentalised system

What is New?

• Roles : 3 – Payment

– Receipts

– Accounting

• Mode of Payment: 1– Cheque

• RBI Advice

• Roles : 1 – Accounting

• Treasuries handle Payment & Receipts

• Mode of Payment: 3– Cash

– Payment Order

– Cheques

• RBI Advice

PAOPAO AG (Accounts)AG (Accounts)

Banking Arrangements

• Bankers to Govt : Reserve Bank of India

Central Govt. AccountCentral Govt. AccountOther UTs & State AGs

Other UTs & State AGs

Railway Fund

Railway Fund

PostalAccount

PostalAccount

TelecomAccount

TelecomAccount

DefenceAccount

DefenceAccount

DptmntlsdMinistries/UTs Account

DptmntlsdMinistries/UTs Account

Proforma balances

Banking Arrangements ....

PAO

Special AccountFocal PointBranch

CDDO AssignmentAccount

Dealing Branch

AccountDealing Branch

Ministry/Dept Accredited BankerAccredited Banker

NoN MONETISED accounts

Flow of Receipts

Tax payer

BankBank

Focal Point BankFocal Point Bank

RBIRBI

PAOPAO

PrAOPrAO

CGACGA

Money

Scrolls

Accounts

Payment Procedure

BANKBANK

PAO

Claimant

DDO

Claim

Bill

Cheque

Outflow of Payments

Dealing BranchDealing Branch

Focal PointBankFocal PointBank

Link CellNagpurLink CellNagpur

PAOPAO

PrAOPrAO

RBI, CASNAGPURRBI, CASNAGPUR

consolidationat CGA

Money

Scrolls

Accounts

Put Thru

Accounting Entries - Receipts

By PAObased on Credit Scrolls

Dr. 8658 Suspense A/c PSB Suspense

Cr. Receipt head

Dr. 8675 RB Deposits

-Dr. 8658 Suspense A/c PSB Suspense

Dr. 8999 Cash Balance

-Dr. 8675 RB Deposits

By PrAObased onRBI put thru

By CGA

Accounting entries - Payments

11Dr. nnnn Service headsCr. 8670 PAO Cheques

22- Cr. 8670 PAO Cheques Cr. 8658 Suspense A/c PSB Suspense

33-Cr. 8658 Suspense A/c PSB Suspense Cr. 8675 RB Deposits

44-Cr. 8675 RB Deposits Cr. 8999 Cash Balance

By PAO on issueof Cheques

By PAO based onDebit Scrolls

By PrAO based onPut Thru statements

By CGA

Borrowings

MoF decides in consultation with RBI

RBI Borrows money

Credited to Govt. A/c with RBI

Scrolls sent to PAO, DEA, MOF

Head wise entry made @PAO , DEA, MOF

Dr. 8675 RB Deposits

Cr. 6001 Internal Debt of

Central Govt

Accountal of Borrowings

• Original Receipt/repayment is by RBI

• PAO maintains headwise accounts

• RBI maintains loanwise accounts

Accountal of borrowings - Drawbacks

Details not available with the Government

• Repayment schedule not available for monitoring

• Lender profile not available with Govt

Proforma Accounts

• Normal Govt accounts on Cash Basis

• Additional & Separate Accounts

• On Mercantile Basis

• Departmental Commercial Undertakings

– Atomic Power Plants

– Delhi Milk Scheme

• Not by autonomous bodies/corporate

bodies

Flow of AccountsParliamentParliament

CivilMinistries

CivilMinistries

RailwaysPostsTelecomDefence

RailwaysPostsTelecomDefence

CCA/CAsCCA/CAs

PAOPAO

Ministryof Finance

Ministryof Finance

CGACGA

C&AGC&AG

UTs/AGs

UTs/AGs