Q: How are Govt Accounts prepared & maintained?

(Rule 71 to 77)
 Accounts of the Union Government shall be prepared every year showing the receipts and
disbursements for the year, surplus or deficit generated during the year and changes in Government
liabilities and assets.
 The accounts shall be prepared by Controller General of Accounts.
 They shall be certified by the Comptroller and Auditor General of India and along with the
report of the Comptroller & Auditor General of India on these accounts, shall be submitted to the
President of India, preferably within six months of close of the Financial Year, who shall cause them
to be laid before each House of Parliament.
 The Accounts of the Union Government shall be kept in such form as the President may, on
the advice of the Comptroller and Auditor General of India, prescribe.
 Thus, the Controller General of Accounts in the Ministry of Finance (Department of
Expenditure) is responsible for prescribing the form of accounts of the Union and States, and to
frame, or revise, rules and manuals relating thereto on behalf of the President of India in terms of
Article 150 of the Constitution of India, on the advice of the Comptroller and Auditor General of
India.
 The 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.
 Government accounts shall be prepared on cash basis. The accounts of Government shall be
maintained in Indian Rupees. All foreign currency transactions and foreign aid shall be brought
into account after conversion into Indian Rupees.
 The annual accounts of the Central Government shall record transactions which take place
during a financial year running from the 1st April to the 31st March thereof.

Q: What are Govt Accounts and how are they kept?

Govt. Accounts are the financial Accounts of any Govt. through which transactions of revenue &
receipts are carried out.
The accounts of Government are kept in Parts or are of three kinds/categories viz
1 Consolidated Fund (Part-l),
2 Contingency Fund (Part-II) and
3 Public Account (Part-III).
Q: Give the Classification of transactions in Govt. Accounts
• Classification of transactions in Government Accounts takes places through 6 tier system
consisting of following :
1 Major Heads
2 Sub-major head.
3 Minor Heads.
4 Sub Heads.
5 Detailed Heads
6 Object Heads.
• Classification should be recorded in all the bills and challans by Drawing Officers.
◦ The Major Heads of account correspond to functions of Government.
◦ Sub-Major head represents a group of allied sub-functions under a particular function.
◦ Minor Heads identify the programmes undertaken to achieve the objectives of the functions
represented by the Major Head.
◦ Sub Head/Sub Minor Head (also called Activity)represents schemes.
◦ Detailed Head denotes sub scheme and
◦ Object Head represent the primary unit of appropriation showing the economic economic
nature of of expenditure such as salaries and wages, office expenses, travel expenses, professional
services, grants-in-aid, etc.

• The six tiers are represented by a unique 15 digit numeric code, given below:
1. Major Head 4 digits (Function);
2. Sub-Major 2 digits (Sub-Function);
3. Minor Head 3 digits (Programme);
4. Sub-Head 2 digits (Scheme);
5. Detailed Head 2 digits (Sub-Scheme);
6. Object Head 2 digits (Object Head or Pry Unit of Appropriation)

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What are Voted & Charged
Expenditures
◦ The expenditure covered under Article 112 (3) of the Constitution of India is charged on the
Consolidated Fund of India 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.
Charged or Voted Expenditure shall be shown separately in the accounts as well as in the Budget
documents

Differentiate between Capital & Revenue Expenditure (Rule 84)

◦ Significant expenditure incurred with the object of acquiring tangible assets of a permanent
nature (for use in the organisation and not for sale in the ordinary course of business) or enhancing
the utility of existing assets, shall broadly be defined as Capital expenditure.
◦ Subsequent charges on maintenance, repair, upkeep and working expenses, which are required
to maintain the assets in a running order as also all other expenses incurred for the day to day
running of the organisation, including establishment and administrative expenses shall beclassified
as Revenue expenditure. Eg, OE,POL, Salary etc.
Capital and Revenue expenditure shall be shown separately in the Accounts.

Q: What do you mean by Banking

Arrangements ? Rule 85
Banking Arrangement means nomination of Banks by Govt for carrying out various banking
operations regarding Receipts (Revenue) & reimbursements (Expenditure). It has been ruled that;-
1 The Reserve Bank of India (RBI) shall be the banker to the Government.
2 It shall maintain cash balance of the Government and provide banking facilities to the
Ministries and subordinate or attached offices either directly through its own offices or through its
agent banks.
3. For this purpose, RBI shall, in consultation with the Controller General of Accounts, nominate a
bank to function as Accredited Bank of a Ministry or Department.
4 Pay & Accounts offices and Cheque Drawing and Disbursing Officer shall have assignment
accounts with the identified branches of the Accredited Bank of the Ministry.
5 All payments shall be made through these identified bank branches.
6These branches shall also collect departmental and other receipts.
7 Tax revenues of the Government shall be collected by the RBI through its own offices or through
the nominated branches of its agent bank.

8. Detailed procedure
to be
followed
for
remittance of Government receipts into Government cash balance and reimbursement of payments
made on behalf of Government by the banks are laid down in the Memoranda of Instructions issued
by the Reserve Bank of
India.

Q: What is Public Financial

Management System (PFMS)-- Rule 86
◦ The Public Financial Management System (PFMS) is a web-based online software application
developed and implemented by the Controller General of Accounts (CGA), Department of
Expenditure, Ministry of Finance, Government of India.
◦ PFMS started during 2009 with the objective of tracking funds released under all Plan
schemes of Government of India, and real time reporting of expenditure at all levels of Programme
implementation.
◦ Subsequently, the scope was enlarged to cover direct payment to beneficiaries under all
Schemes.
◦ Gradually, it has been envisaged that digitization of accounts shall be achieved through PFMS
and beginning with Pay & Accounts Offices payments, the O/o CGA did further value addition by
bringing in more financial activities of the Government of India in the ambit of PFMS. The
outputs / deliverables for the various modes / functions of PFMS include (but are not limited to):
◦ Payment & Exchequer Control
◦ Accounting of Receipts (Tax & Non-Tax)
◦ Compilation of Accounts and Preparation of Fiscal Reports
Integration with Financial Management Systems of States

As per GFR :-

(1) Public Financial Management System (PFMS), an integrated Financial Management

System of Controller General of Accounts, Government of India, shall be used for
sanction preparation, bill processing, payment, receipt management, Direct Benefit
Transfer, fund flow management and financial reporting.
(2) All the ministries sanctioning grant-in-aid shall register all implementing agencies till
last level of implementation on
PFMS to track fund flow and unspent balances.
(3) All the payment, to the extent possible, shall be released
'just-in-time' by the Ministries through PFMS.
(4) Detailed Demand for Grants (DDG), as approved, must be uploaded on PFMS at the
start of each Financial Year.
(5) All the re-appropriation orders, surrender order shall be generated through PFMS
system.
(6) All grantee institutions shall submit Utilisation Certificates on PFMS.

Q: What is Direct Benefit Transfer. Give its importance and explain instructions related to it. (Rule
87)
◦ Direct Benefit Transfer (DBT) is an initiative of Central Government announced across the
country w.e.f. 1.1.2013., with the aim of reforming Government delivery system by reengineering
the existing process in welfare schemes for simpler and faster flow of information/funds and to
ensure accurate targeting of the beneficiaries.
With DBT program, Govt of India aims to make payments directly into the Aadhaar linked bank
accounts of the end beneficiaries (recipients), under various schemes so thatmalpractices such as
diversions of funds, delay, mis-appropriation, fraud and duplicate payments, are avoided completely
or atleast minimized to the possible extent.
Instructions: As per GFR
(1) Transfer of benefits should be done directly to
directly
beneficiaries under various Government Schemes and
Programmes using
using Information and Communication
Technology (ICT).
(2) Necessary process re-engineering to minimise intermediary levels and to reduce delay
in payments to intended beneficiaries with the objective of minimising pilferage and
duplication should be done for all Government Schemes and Programmes.
(3) For this purpose, the process for implementation of DBT as prescribed should be
adopted.
(4) DBT should include in-kind and cash transfers to beneficiaries as well as
transfers/honorariums given to various enablers of government schemes like community
workers, etc. for successful implementation of the schemes.
(3) Transfer of cash benefits from Ministries/Departments should be done
a directly to beneficiaries from Ministries/Departments;
b through State Treasury Account; or
c through any Implementing Agency as appointed by Centre / State Governments.
4 In-kind Transfer to Individual Beneficiary/ Household/Service provider includes schemes or
components of schemes where in-kind benefits are given by the overnment or through any
Implementing Agency as appointed by Centre/State jovernments to Individual Beneficiary/
Household/Service providers.
5 Ministries/Departments will use PFMS platform for processing of payments for cash / in kind
transfers to individual beneficiaries as per framework laid down by Department of Expenditure,
Ministry of Finance.
6 Implementing Agencies shall generate Electronic Utilisation Certificate (E-UCs) onPFMS portal
and submit them online. E-UCs shall be used to certify that money was actually utilized for the
purpose for which it was sanctioned to eliminate the need for physical generation of UCs.
7 Transaction charges for the financial intermediaries facilitating DBT payments shall be paid as
stipulated by Ministry of Finance.
Q: What are Annual Accounts? Give their Types (Rule 89&89)
◦ Annual Accounts of a Government, say Union or State or UT, are the Accounts showing
details of Receipts and Disbursement of a particular Financial Year of that Government.
◦ As per GFR-2017, there are two AnnualAccounts of the Govt:
a Appropriation Accounts.
b Finance Accounts

I. Appropriation Accounts:
The statements, which are prepared for presentation to Parliament, comparing the amount of actual
expenditure with the amount of Grants voted by Parliament and Appropriations sanctioned (for both
Voted/Charged items) by the President are called the
"Appropriation Accounts".
 These Accounts list the original budget allocation,
allocation,
supplementary
grants,
surrenders
and
re-
appropriations distinctly and indicate the actual capital and revenue expenditure on various
specified services vis-a-vis those authorized by the Appropriation Act in respect of both charged and
voted items of budget.
• Appropriation Accounts thus facilitate management of finances and monitoring of budgetary
provisions and are therefore complementary to Finance Accounts.

In other words,
◦ Appropriation Accounts are the accounts reflecting the Government's expenditure in a
financial year compared against the amounts of voted grants and charged appropriations, as
specified in the Schedules appended to the Appropriation Act passed by Parliament.
◦ These accounts contain information regarding re-appropriation of the sanctioned provision
from one unit of appropriation to another, savings and excess of expenditure if any against these
appropriations as well as the supplementary grants.
◦ The appropriation account is an aid for the Parliament and the Public Accounts Committee to
ascertain the performance of Government against the budgeted provisions.
◦ The Appropriation Accounts of the Union Government are submitted to Parliament under the
provisions of Article151 of the Constitution, and are intended to disclose-
a That the moneys indicated therein as having been disbursed, were legally available for and
applicable to the service or purpose to which they had been applied or charged.
b That the expenditure conforms to the authority governing it; and
The effects of re-appropriations ordered by the Ministry/Department

Il. Finance Accounts:

◦ The Finance Accounts present the accounts of receipts and outgoings of the Government for
the year together with the financial results disclosed by the revenue & capital accounts, the accounts
of public debts and the liabilities & assets as worked out from the balances recorded in the accounts.
Thus, Finance Accounts of a Government represents the financial position of the State along with
details of receipts and disbursements of the Government for the year.

As per the instructions contained in GRF,

• Finance Accounts of the Government of India (including transactions of Department of Posts and
Ministries of Defence and Railways and transactions under Public Account of India of Union
Territory Governments), showing under the respective Heads the annual receipts and disbursements
and statement of balances for the purpose of the Union, shall be prepared and signed by the
Controller General of Accounts countersigned by the Secretary (Expenditure), Ministry of Finance.

Under Article 150 of the Constitution, the Annual Appropriation Accounts (Civil) and Union
Finance Accounts are submitted to Parliament on the advice of Comptroller and Auditor General of
India.
To Sum up the difference:
The Finance Accounts of a Government represents the financial position of the State along with
details of receipts and disbursements of the
Government for the year. It shows both expenditure and reciepts (revenue). It is a very vast.
The
Appropriation Accounts presents the the sums
expended in the year against the provisions specified in the schedules appended to the
Appropriation Act. It shows expenditure only. It is not vast.