Introduction to Government

Accounting System
Preparation and Presentation of Accounts
 Accounts of the Central Government are prepared every year, showing the
receipts and disbursement for the year, surplus or deficit generated during
the year and changes in Government liabilities and assets.
 These accounts are certified by C&AG of India.
 The Annual Accounts of the Union Government, each of the States and UT
Government are prepared in the form prescribed by the President on the
advice of C&AG of India under Article 150 of the Constitution.
 These accounts are submitted to the respective State/UT Legislature and
its Parliament on or before such dates as may be determined with the
concurrence of Government concerned.
 The report of the C&AG of India relating to these accounts are submitted to
the President of India, who shall cause them to be laid before each House
of Parliament.
 Form of Accounts
• By virtue of the provisions of Article 150 of constitution,
the accounts of the Union Government are kept in such
form as the president; on the advice of C&AG of India
prescribe.

• The Controller General of Accounts in the Ministry of

Finance (Deptt. of Expenditure) is responsible for
prescribing the form of Accounts of Union Government
and States and to frame or revise rules and manuals
relating thereto on behalf of President of India in terms
of Article-150 of the Constitution of India, on the advice
of C&AG of India.
 Principles of Accounting
Main principles according to which the
accounts of the Government of India shall
be maintained are contained in
Government Accounting Rules, 1990;
Accounting Rules for Treasuries; and
Account Code volume-III.
 Cash based Accounting
• Government Accounts are prepared on cash basis, with
the exception of such book adjustment as may be
authorized by Government Accounting Rules 1990, or by
any general or special order issued by the Central
Government on the advice of the C&AG of India.

• The transactions in Government accounts represent the

actual cash receipts and disbursements during a financial
year or distinguished from amounts due to as by
Government during the same year.
 Period of Accounts
• Annual Accounts of Union Government record
transactions which take place during a financial
year running from 1st April to 31st March.

• The Accounts of Government are maintained in

Indian Rupees. All foreign currency transactions
and foreign aid are brought into accounts after
conversion into Indian Rupees.
 Form of Accounts: Main Divisions of Account

Government Accounts are kept in the following three parts:

Part-I Consolidated Fund of India (Including Union

Territory Administration)
or of the State or Union T
Government concerned.
Part-II Contingency Fund

Part-III Public Account of India (including UT

Administration) or of the
State concerned.

There is NO Separate Public Account in case of UT

Governments; the transactions pertaining to this are booked
in the Public Account of the Union Government.
 Part-I Consolidated Fund
Consolidated Fund is divided into two divisions viz: (i) Revenue and (ii)
Capital Divisions:

 Revenue Division comprises of the Sections (a) (Revenue Receipts)

dealing with the proceeds of taxation and other receipts classified
as revenue and section (b) Revenue Expenditure dealing with
expenditure met therefrom.

 Capital Division comprises of three sections namely, (a) ‘Receipt

Heads (Capital Receipts)’ which deals with receipts of a capital
nature which can not be applied as a set off to Capital Expenditure.
(b) Expenditure Heads (Capital Expenditure) deals with expenditure
met usually from borrowed funds with the objective of increasing
concrete assets of a material and permanent nature. (c) ‘Public
Debt, Loans and Advances etc.’ which comprise of loans raised and
repayments by Government such as internal debt, external debt of
Central Government and loans and advances made by
Government and recoveries, transactions relating to
Appropriation to Contingency Fund and Inter-state settlement.

• Capital expenditure is mostly for creating tangible assets of

permanent nature.
 Part-II- Contingency Fund
Under this, transactions connected with the
contingency fund, set up by the
Government of India under Article 267 of
the Constitution and Section 48 of the UT
Act 1963 are recorded. There is a single
major head i.e. 8000 to record
transactions there under followed by
minor, sub and/or detailed heads. There is
no object head.
 Part-III Public Accounts
• Transactions relating to debt (other than those included in
Part-I), Deposits, Advances, Remittances and Suspense are
recorded.

• The transactions under Debt, Deposit and Advances in this part

are such, in respect of which Government incurs a liability to
repay the moneys received or has a claim to recover the amount
paid, together with the repayments of the former (Debt and
Deposits) and the recoveries of the latter (Advances).

• The transactions relating to ‘Remittances’ and suspense in this

part embrace all merely adjusting heads under which appear
such transactions as remittances of cash between treasuries
and currency chests and transfer between different
accounting circles.
Classification of transactions in
Government Accounts

As a general rule, classification of

transactions in Government Accounts have
close reference to functions, programmes
and activities of the Government and the
object of revenue or expenditure, rather
than the Department in which the revenue
or expenditure occurs.
 Major, Minor and Detailed Heads:

The main unit of classification in accounts is major head (comprising

sub-major head wherever necessary) which is divided into minor head,
each of which has a number of subordinate heads, generally shown as
sub-heads. The sub-heads are further divided into detailed head which is
followed by object heads as under:

Major Head
Sub-Major Head (wherever necessary)
Minor head
Sub-head
Detailed Head
Object Head
Major Heads of accounts, falling within the
sectors of expenditure heads generally
correspond to functions of Government
while minor heads identify the programmes
undertaken to achieve the objectives of the
functions, represented by the Major head.

The sub-head represents schemes, the

detailed head denotes sub-scheme and
object head represent primary unit of
appropriation showing the economic
nature of expenditure such as salaries &
wages, office expenses, grants-in-aid etc.
Classification of expenditure as ‘charged’
& as ‘voted’

 The expenditure covered under Article 112(3) of the

Constitution is charged on the Consolidated Fund and is
not subject to vote by the Legislature.

 All other expenditure met out of the Consolidated Fund of

India is treated as voted expenditure. The Budget
document is a voted expenditure. Charged and voted
expenditure are shown separately in the Government
Accounts.
Capital and Revenue expenditure
Capital Expenditure:

Expenditure incurred with the object of

acquiring tangible assets of a permanent
nature or enhancing the utility of existing,
assets are defined as Capital Expenditure.
Revenue Expenditure:

Subsequent expenditure on maintenance,

repair, upkeep and working expenses which
are required to maintain the assets in a running
condition including establishment and
administrative expenses are classified as
Revenue expenditure.

Capital and Revenue expenditure are

shown separately in the Accounts.
 Allotment of Code to Major head and
range of Code numbers
To each Major head a four digit code has been allotted, indicating the
Major head; is a Revenue Receipt Head or Revenue Expenditure Head
or Capital expenditure head or Loans and Advances Head or it pertains
to Public Account:

(a) If the first digit of a major head is ‘0’ or ‘1’, the Head of
Account will represent ‘Revenue Receipt’.
(b) If the first digit of a major head is ‘2’ or ‘3’ it will represent
‘Revenue Expenditure’.
(c) If the first digit of a major head is ‘4’ or’5’, it will represent
‘Capital expenditure’.
(d) If the first digit of a major head is ‘6’ or ‘7’ it will represent
‘Loans & Advances’.
(e) First digit of a major is ‘8’; it will represent Contingency Fund and
Public Account.
Note:
(1) Major head ‘4000’ represents Capital receipt.
(2) Major head ‘8000’ represents Contingency Fund.

Adding 2 to the first digit of Revenue Receipt Head will

give the code allotted to corresponding Revenue
Expenditure Head, adding another 2 will give the code
allotted to capital expenditure head and adding another 2
will give the Loans and Advances Head of Account.
For example Major Head:

0401 represents the Revenue Receipt Head of Crop

Husbandry
2401 represents the Revenue Expenditure Head of Crop
Husbandry
4401 represents the Capital outlays on Crop Husbandry;
and
6401 represent Loans for Crop Husbandry.
 Range of Code Numbers allotted to
Major Head
Range of Code numbers allotted under the scheme of
certification is shown below:

Part-I Consolidated Fund Major Head

Code
Section-I Revenue Receipt Heads 0020-1999
Revenue Expenditure Heads 2011-3999
Section-II Capital Receipt Head 4000
Capital Expenditure Head 4046-5999
Section-III Public Debts, Loans & 6001-7999
Advances
Part-II Contingency Fund 8000
Part-III Public Accounts 8001-8999
 Annual Accounts
Every year two Accounts are prepared for
Union Government:

1. Appropriation Accounts.

2. Finance Accounts.
 Appropriation Accounts
• Appropriation Accounts represent expenditure only.
• Appropriation Accounts of Central Government Ministries
(other than Ministry of Railways) and Central Civil Departments
excluding Department of Post and Defence Services) are
prepared by Principal Accounts Officers of the respective
Ministries and Department under the guidance and supervision
of the Controller General of Accounts and signed by their
respective Chief Accounting Authorities i.e. Secretaries in the
concerned Ministries or Department.
• Union Government Appropriation Accounts (Civil) which is
required to be submitted to the Parliament, is prepared by the
Controller General of Accounts annually by consolidating the
aforesaid Appropriation Accounts.
 Appropriation Accounts pertaining to
Department of Post and Defence
Services are prepared and signed by the
Secretaries of Department of Post and
Ministry of Defence respectively and
Appropriation Account of Ministry of
Railway is prepared and signed by the
Chairman of Railway Board.
 Finance Accounts
Finance Accounts represent expenditure as well as
Receipts of Union Government. Finance Accounts of
the Government of India(including transactions of
Department of Posts and Ministries of Defence and
Railways) showing under the respective Heads the
annual receipts and disbursements for the purpose of
the Union called Finance Accounts are prepared by the
Controller General of Accounts countersigned by the
Secretary (Expenditure), Ministry of Finance.
 Sources of Compilation
• The following are the three sources of
compilation of monthly account in Pay and
Accounts Office/ Pr. Accounts Offfice.
• 1. Debit Vouchers which have been paid (DV)
• 2. Transfer Entries (TE)
• 3. Bank Scrolls/ Put Through Statement.
 Debit Voucher
The bills are received from DDO in PAO offices for
pre-check and payment. These bills after proper
scrutiny are passed for payment. Consequent
upon the delivery of cheque by PAO to DDO or
party concerned the bill becomes Voucher.
Thereafter on receipt of daily memorandum of
payments together with the Vouchers from
Cheque Section, the DVs are posted in
Compilation Register (Form CAM-33) as per
classification recorded in the Voucher. It is
important to see that entries on Debit and Credit
sides are balanced i.e. the sum on both side is
equal.
 Transfer Entry
Transfer entry is prepared for the following
purposes:
 To rectify misclassification in Accounts
 To release Grants-in-aid/loans & advances
to State Govt. (Except the State Govt. of J &
K and Sikkim).
 To carry out periodical adjustments which
don’t involve cash outflow or cash inflow.
 Bank Scrolls
All the cash transactions of the Ministry/
Department are handled by accredited Bank of
the Ministry/Deptt. Therefore these
transactions are reported by the bank to the
cocerned Ministry/Deptt. The bank prepares on
daily basis receipt scroll, showing the money
received by the bank on behalf of the
Ministry/Deptt. and payment scroll, showing
amounts paid on behalf of Ministry/Deptt.
These scrolls are received by PAO alongwith
challans and paid cheques.
 Receipt Scroll
On receipt of the receipt scroll, it has to be
ensured that all the challans sent by the
Bank with the receipt scroll in challan is
same as shown in the Bank Scroll. After
this receipt is credited to respective heads
with contra debit to 8658-Suspense A/c
PSB Suspense or 8675-Deposits with
Reserve Bank-Central Civil as the case may
be.
 Payment Scroll

Payment scroll shows the encashment of

cheque issued by PAO. Here also it is to be
ensured that all cheques attached with
the payment scroll pertain to the PAO. This
is very important because some times
payments of other department are
debited wrongly.
 Banking Arrangements
Role of RBI & Public Sector Banks in handling
Government transactions:
 General banking business consisting of receipts,
collections, payments and remittances on behalf of
Central Govt. is carried on by RBI as their Banker.
 Where the branches of RBI do not exist Govt.
business is handled by Public Sector Banks as
Agents of RBI
 RBI, Central Accounting Section, Nagpur maintains
General Ledger of the Union Govt.’s Cash Balance.
 Public Sector Banks get turn over Commission from
RBI at the present rate of 11.22 paise per Rs. 1000/-
 Banking Arrangements (Contd.)
• Some specified transactions viz. the release of
Grants-in-aid/Loans to State Govts. etc., are
routed by the Principal Accounts Officers directly
through the channels of RBI, Central Accounts
Section, Nagpur by issue of advice avoiding undue
delays and turn over Commission on such
transactions.
• Since the State Governments of J& K and Sikkim
do not have their Accounts with Reserve Bank of
India, the release of Grants-in-aid/Loans to these
States etc. are arranged by the Prinicpal Accounts
Office by issue of Cheques/Drafts
To understand the Banking
procedure, it is essential to know
The Accounting and adjustment of receipts and
payment routed through the channels of Public
Sector Banks/ RBI.
a) Role of Dealing Branch
b) Role of Focal Point Branch
c) Role of link Cell, Government Accounts Deptt. in
the case of SBI
d) Role of RBI, Central Accounts Section, Nagpur.
THANK YOU