Taking care of the kitty

Accounting is indispensably needed by private non-governmental institutions as well as government
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Accounting or accountancy is commonly known to represent record of business transactions in a systematic manner. People generally do not take it beyond that; instead discount it as a clerical & sedentary job with scope limited to only trade and commerce.

Whether based on single entry system as mostly in government accounts or on double entry system in commercial accounts, accounting is indispensably needed and used everywhere by private non-governmental institutions as well as Government.

Governments being answerable before the electorate have devised the accounting systems & patterns suitable to business of Government. Its patterns may differ yet aims and objectives are same that money invested or funds released are properly accounted for and the intended benefits  achieved.               

Accounting and accountability is department, work, place, person, gender, race, religion, rich, poor and time neutral. It has moved to standardisation from being maintained on parchments in ancient times to birch thereafter to paper, to digitisation now through computers used in AI, InfoTech, biotech, nanotechnology and the Big Data Algorithms supported by stream of human biometric data to read, manipulate and control human brain and thought.               

For space limitation here is an overview of Government accounts of Jammu  & Kashmir. In J and K Government accounts are kept in three parts such as:

(i)Consolidated Fund: It consists of two sections: Revenue and Capital including Public Debt and Loans. Revenue section is further divided into Revenue Receipts and Revenue Expenditure. Revenue Receipts include Tax Revenue, Non Tax and Grant in-Aid. Revenue Expenditure contains  General Services, Economic Services, Social Services and Grant in Aid. The Capital section  is divided into Capital Receipts and Capital Expenditure/Payments. Capital Expenditure is further  divided into seven sectors of General Services, Economic Services, Social Services, Public Debt, Loans & Advances, Transfer to Contingency Fund and Inter-State Settlement.

(ii)Contingency Fund: This fund is a sort of imprest established by the State Legislature  by law and is placed at the disposal of  the Governor to enable  him to make advances for meeting unforeseen expenditure  pending authorization by the State Legislature for such expenditure. The unforeseen expenditure  also includes the  expenditure  that will be incurred on a new service which has not been included in the budget of J and K. This fund too has only one major head of account. The amount of contingency fund of J and K  for the year 2020-21was Rs.25 crore. The fund is recouped by debiting the expenditure to the functional  major head concerned in the Consolidated Fund of the State.

(iii)Public Account: This account represents six sectors of Provident Funds, Small Savings, Reserve Funds, Deposits & Advances, Remittances & Cash Balances and  Suspense & Miscellaneous. Public moneys received by or on behalf of government where the government acts as a banker or trustee are credited to this account. The Public Account is not subject to the vote of the Legislature.

Governments accounts are presented  in a six tier classification  viz, Major Heads with four digits, Sub-Major Heads (two digits), Minor Heads (three digits), Sub-Minor Heads (two digits), Detailed Heads ( two or three digits), and Object Heads ( two or three digits). Major Heads  represent functions of Government, Sub-Major Heads represent Sub-Functions, Minor Heads show programmes/activities, Sub-Minor Heads show schemes, Detailed Heads denote sub-schemes, and the Object Heads express purpose or object of expenditure. The expenditure to be incurred on planed programmes and schemes is termed as plan expenditure. Likewise the expenditure incurred on  pay and allowances of gazetted & the non-gazetted officers, rent/rates/taxes if any, watch & ward, maintenance charges, day to day expenses for running the office etc is termed as non-plan and booked as revenue expenditure under a relevant major head of account  which is allotted a four digit code. 0-1 represents major head revenue receipts, 2-3 represent major head revenue expenditure, 4-5 capital receipts and expenditure, 6-7 describe  loan/advances heads and appropriation to contingency fund, 8-contingency fund and  public account. Adding 2 to the first digit of the revenue revenue head  will give the code number of revenue expenditure head  and adding further 2 to the revenue expenditure the capital head.

Exampli gratia:0058 is Major Head Revenue Receipts  of Stationery & Printing Account. Adding  2 to first digit will make it 2058 which is Major Head Revenue Expenditure of Stationery & Printing Account and adding further 2 to this account will make it 4058 which forms Major Head of Capital Expenditure for  Stationery & Printing Account.

The Major Head is the main unit of classification  in  accounts. It contains the  following coding pattern.

For  utilising  funds  provided in the budgets which are prepared annually with a view to executing new functions, programmes, schemes and for systemic apparatus associated with their implementation, accounting  is used as a main tool to check diversion of funds from one head of account to another as diversion of funds is tantamount to temporary misappropriation of funds.

Funds allotted  for new works are categorized as plan and  rest of the allotments as non-plan which are accordingly booked in the  accounts. Accounting format, system of codification, pattern of classification, year from financial to calendar, June or any other interval shorter or longer may change but their preparation and presentation will/can never be dispensed with.

Certain transactions that appear in the accounts do not involve actual movement of cash while booking. Some of these take place at the level of account rendering units like treasuries and divisions.

For example transactions involving adjustment of deductions of general provident fund, and recoveries of advances from salaries are recorded by debiting the functional major heads of the department concerned by book adjustment to revenue receipts , loans and public account.

At the end of a financial year there are Finance Accounts and the Appropriation Accounts also. The Finance Accounts present the financial position of the state along with details of receipts and disbursements of the government for the year.    

The Appropriation Accounts present the sums spent in the year against the allotted provisions. The accounts are closed annually at the end of financial year that ends on 31,March  and the unspent balances of funds, if any,  are surrendered before such closure to government. 

The whole exercise of accounting is subjected to statutory audit by CAG of India to see whether the public money has been utilized for the purpose for which it was allotted and  the intended benefits have actually accrued to the country, targeted  people or area as laid down in budgetary provisions or other directives.

It  ensures not only arithmetical accuracy but also secures itemised control over nature & amount of funds that is relevance of object, expenditure and effect. This is not an exercise to straight jacket the executive but a combination of ethics, accounts, economics etc. aimed at public good.

The author is a former Sr. Audit Officer and Consultant in the AG’s Office Srinagar.

DISCLAIMER: The views and opinions expressed in this article are the personal opinions of the author.

The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.

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