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Introduction to Government Accounts:

 

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Session Overview

The real function of all accounting is to render a service to management. It is intended to give complete information on the working of an enterprise, in order that it can be analyzed and interpreted for use in managing the operations economically, efficiently and effectively.

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Important Points

• During this session, we will learn:• >What are accounts.• >Introduction to initial accounts.• >Purpose of accounting in Government.• >Principles of Government Accounting.• >Role of Comptroller & Auditor General of India.• >Responsibility of Accountant General

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Learning objective

 

• At the end of the session, the learner will be able to define the accounts, state purpose and importance of accounts.

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Government Accounting

• Accounts are statement of transactions relating to money or things having value.

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Government Accounts

• Budget is the basis of Accounts

• Government Accounts are based, mainly, on ‘Single Entry System’ .

• In Government Accounts, barring a few exceptions, adjustments and correction of misclassifications, only cash transactions are recorded.

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Government Accounts

• In Government Accounts cost of physical assets is not carried forward from year-to-year.

• In government there is no concept of profit or loss, and so the Government Accounts do not have any profit and loss account or operating results.

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Three parts of Accounts

• Following the provisions of the Constitution, accounts of Government are kept in three parts viz.:

• Consolidated Fund

• Contingency Fund

• Public Account

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Consolidated Fund

– Includes:

– all revenues received by Government;

– all loans raised by Government; and

– all moneys received by Government in repayment of loans shall form one Consolidated Fund.

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Contingency Fund

• This fund is in the nature of an imprest. From this imprest, advances can be made by the President/Governor of a State for meeting unforeseen urgent expenditure pending authorization of such expenditure by Parliament or State Legislature. It is recouped from the Consolidated Fund.

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Public Account

• Any money, which is not to go to the Consolidated Fund is credited to the Public Account. Some of the kinds of transactions booked in the Public Account are:

• Provident Funds;• Savings Deposits and Certificates;• Reserve Funds;• Deposits;• Advances;

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Revenue and Capital Expenditure

• Revenue expenditure is current expenditure of the Government on its day-to-day functions and services and is usually met from its revenue.

Capital expenditure is incurred for increasing durable assets of material and permanent character and is usually met from borrowings.

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Voted Expenditure and Charged Expenditure

• Charged Expenditure: Expenditure charged upon the Consolidated Fund of India/State/Union Territory administration.

• Voted Expenditure: Expenditure put for the vote of the house (Parliament or State Legislature)

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Plan Expenditure and non-Plan Expenditure

The system of planned development of the country has made it necessary to distinguish between expenditure incurred under five-year plans (called the Plan Expenditure) and the other expenditure (Non-Plan Expenditure).

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Five-tier classification of Government Expenditure

• A five tier classification has been prescribed for classification of Government expenditure. These tiers are:

• Sectors, • Major Heads,• Minor Heads, • Sub-Heads and • Detailed Heads of account,

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Methods of Government Accounting

• The mass of the Government accounts on cash basis. .

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Journal and Ledger

The Accounts of Government are based, in the main, on the single entry system and the double entry system is applied only in regard to the maintenance of a set of technical accounts called the Journal, Ledger and Trial Balance Sheet.

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Purpose and importance of Accounting in Government

• to collect, account for, collate, compile and consolidate numerous financial transactions of the government for a particular period and present them in the form that is easily understood and that can be made use of by the persons interested in them;

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Purpose and importance of Accounting in Government

• to ensure that all the transactions of the Government have been accounted for and that no transaction has been left out of the accounts;

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Purpose and importance of Accounting in Government

• to present accounting and financial data in a form that is a useful managerial tool and that which can be used by the executive to control public spending and canalize it into desired directions;

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Purpose and importance of Accounting in Government

• to provide the legislative bodies with data that will enable them to determine how their mandate to executive in raising new resources (through taxation) and their mandate on incurring expenditure out of the Consolidated Fund has been followed;

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Purpose and importance of Accounting in Government

• Accounting in government fulfills the information need of interested citizens of the country, interested agencies, both national agencies and international agencies, to know the nature and extent of government spending.

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Purpose and importance of Accounting in Government

• to create a data bank over a period of time to reflect on and to use the financial data available in the accounts for socio-economic development of the nation;

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Purpose and importance of Accounting in Government

• to ensure accuracy of accounts and balances where the Government acts only as a banker or as a custodian of moneys that belong to some other person or authority. This is particularly relevant to transactions under Public Account and those accounts, which do not close at the end of the financial year to Government but close to balance.

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Principles of Government Accounting

• to meet the requirements of Parliamentary control over finances

• to meet the requirements of executive control over public fiancés.

• to ensure maintenance of subsidiary accounts.

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Principles of Government Accounting

• to ensure maintenance of initial accounts. • to ensure inclusiveness and totality of

financial transactions. • Government Accounting has to be on

cash basis, • Government Accounting has a detailed

system of classification of receipts and payments

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Principles of Government Accounting

• to ensure preparation of monthly and annual accounts.

• To ensure generation of database of financial data

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Classification of financial transactions

• Five-tier classification of Government Expenditure

• The mass of the Government Accounts, being on cash basis, is kept on Single Entry System.

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The Annual Accounts

• The Annual Accounts of the Government are prepared for each financial year separately for Union Government, for each State Government and for each Union Territory having a Legislative assembly .

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Finance Accounts

Finance Accounts present the account of all receipts and disbursements for the year

year together with the financial results disclosed by the revenue and capital accounts.

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The Appropriation Accounts

• The Appropriation Accounts present the details of expenditure incurred only from the Consolidated Fund.

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Basics of Government Accounts

• Budget is the basis of accounts, which are maintained on cash basis. Budget, referred to as Annual Financial Statement’ in Article 112 (in respect of Union Government) of the Constitution of India, is a statement of estimated receipts and expenditure of the Government for a financial year.

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Annual Accounts

• These accounts are prepared from the accounts compiled by the authorities authorised to maintain the accounts of Central Government, State Governments and Union Territory Governments.

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Subsidiary Instructions

• Subsidiary instructions are the instructions issued to carry into effect the provisions of the rules relating to form of Accounts, and in particular, instructions for opening new heads of accounts or modification of existing ones

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Special provision relating to Railways, posts, Telecommunication and Defence

Departments

• For the sake of practical convenience, the forms of accounts, relating to railways, Posts Telecommunications and Defence Department, are determined by the Departmental Accounting authorities as prescribed by the Central Government in the Ministry of Finance, on the advice of the Comptroller and Auditor General of India.

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Initial Accounts

• The initial accounts of Government transactions in India are prepared by the authorities through whom the transactions occur, such as treasuries, various departmental offices, pay and accounts organisations etc.

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Main purpose of Government Accounting

• Correctness of transactions.

• Easy format.

• Useful form.

• Providing information to Government.

• Ensuring accuracy

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Role of Comptroller and Auditor General of India

• Under Article 150 of the Constitution, the President on the advice of the Comptroller and Auditor General makes the basic rules relating to the form of accounts of the Union and States.

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 Responsibility of Accountant General

(Accounts and Entitlements)• Compilation of Monthly Accounts of

Expenditure and Receipts.

• Preparation of Appropriation Accounts and Finance Accounts.

• Authorization of pension.

• Maintenance of General Provident Fund, Long term advances etc.