Government Accounts (Funds)


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

In accordance with Constitutional requirements Government accounts are maintained in the following three categories:
 
Part I Consolidated Fund
Part II Contingency Fund
Part III Public Account
 
(I) Consolidated Fund of India
Under Article 266(1) of the Constitution of India, all revenues received by the Government of
India, all loans raised by the Government by issue of treasury bills, loans or Ways and Means advances and all moneys received by the Government in repayment of loans shall form one consolidated fund to be titled the " Consolidated Fund of India".
 
Divisions Under Consolidated Fund of India are - Revenue Account, Capital Account and Debt, and Loans & Advances: Expenditure and Receipts
 
The Consolidated Fund of India has the following two divisions.
i.Revenue Account
ii. Capital Account
 
Revenue Account- Expenditure/Receipts:
The Revenue Account deals with the proceeds of taxation and other receipts classed as
Revenue and expenditure met there from.
 
Capital Account-Expenditure/Receipts:
The Capital Account deals with expenditure incurred with the purpose of either increasing the
concrete assets of durable nature or of reducing recurring liabilities. It is logical otherwise to meet Capital expenditure from borrowed funds, the liabilities in respect of which are spread over a number of years, as the benefits arising from Capital expenditure flow over a period of years. Capital Account also includes various types of Capital Receipts.
 
The Capital Account comprises of the following sections:
 
a. The section ‘Receipt heads (Capital Account)’ deals with receipts of a Capital nature which cannot be applied as a set off to Capital Expenditure;
 
b. The section ‘Expenditure heads (Capital Account)’ deals with expenditure incurred with the object either of increasing concrete assets of a material and permanent character or of reducing recurring liabilities. It also includes receipts of a Capital nature intended to be applied as set off to Capital expenditure; and
 
c. The sections ‘Public Debt’ and ‘Loans and Advances’, comprise of loans raised and
their re-payments such as internal debt, external debt and their recoveries.
 
For Budgeting purposes, the distinction between Revenue expenditure and Capital expenditure is of crucial importance, for which uniform principles are followed both at the Centre and in the States. The Capital account also includes loans raised by Government and their repayments and
loans and advances paid by the Government and their recoveries.
 
(II) Contingency Fund of India
 
Under Article 267 of the Constitution of India, a ‘Contingency Fund’ may be established, by law, by Parliament into which shall be paid from time to time such sums as may be determined by such law, and the said fund shall be placed at the disposal of the President, to enable advances to be made by him out of such fund for the purposes of meeting unforeseen expenditure pending authorization of such expenditure by Parliament. Contingency Fund is in the nature of an imprest. From the financial year 2005-06 the corpus of the Contingency Fund of India has been enhanced to Rs.500 crore. This was done under clause 115 of the (Finance) bill of 2005, by
transfer of an additional amount of Rs 450 crore from the Consolidated Fund of India to the Contingency Fund of India. Out of this corpus of Rs. 500 crore, Rs. 5 crore is kept at the disposal of Ministry of Railways. The Central Government established its Contingency Fund under the Contingency Fund of India Act, 1950 and has also framed the ‘Contingency Fund of India Rules’ under Section 4 of that Act. These rules prescribe the procedure for obtaining advances from this fund and their subsequent adjustment.
 
The corpus of the Contingency Fund is created by debit to the Consolidated Fund of India, and when expenditure is incurred out of an advance from the Contingency Fund, the expenditure is
booked under the same head under the ‘Contingency Fund’ under which it would have been booked had the expenditure been incurred from the Consolidated Fund of India. When such an advance is paid from the Consolidated Fund of India, the corpus of the fund gets depleted. Subsequently, with the regularization of expenditure by obtaining vote of Parliament, the amount of advance is recouped to the corpus of the Contingency Fund by debit to the Consolidated Fund of India. The expenditure is then booked under the same head under the Consolidated Fund of India, as revenue or capital expenditure, as the case may be. The Contingency Fund of India can
be enhanced through a Finance Bill when the House is in session or through Ordnance if the House is not in session, in case the situation so warrants. Withdrawal from the Contingency Fund of India takes place with the approval of Secretary, Department of Economic Affairs, in terms of the Contingency Fund of India Act, 1950.
 
In Government accounts, Contingency Fund has a single Major Head to accommodate all
transactions of the fund.
 
(III) Public Account
 
To complete the classification, Part III shows transactions relating to Debt (other than those
included in Part I), ‘Deposits’, ‘Advances’, ‘Remittances’ and ‘Suspense’. In brief, all other public moneys received by or on behalf of the Government of India are credited to the Public Account of India as empowered vide Article 266(2) of the Constitution of India. Such funds, however, remain merged in the cash balance of the Central Government, (with the Reserve Bank of India as the bankers to the Government), till payments are made to those to whom the funds pertain or are utilized for general or specific purposes as in the case of Reserve Funds, or necessary adjustments are made, for example in the case of inter-Government transactions. The net funds in the Public Account are also available for financing the expenditure of Government.
The Public Account transactions are grouped according to sectors and sub-sectors which are
further sub-divided into Major Heads of Account and further down as per the accounting classification system of Government.
 
Union Government Accounts
 
Accounts, as elsewhere, are a systematic record of various activities and functions expressed in
financial terms and maintained by activity Centres. The Constitution of India envisages the accounts of the Union and the States to be kept in such a form as the President may on the advice of the C&AG prescribe. The word ‘Form’ has a comprehensive meaning so as to include the prescription not only of the broad form in which the accounts are to be kept but also the appropriate heads under which certain transactions or classes of transactions have to be
entered. Accordingly accounting principles and policies/procedures have been established in rules and regulations mandated by the Union Government on the advice of the C&AG.
 
The Government Accounts have necessarily to comply with the budgetary structure of the country. Since budgets in India are on an annual basis, governmental transactions are also finalised in the accounts on an annual basis. However, the Government Accounts of each financial year are kept open for a certain period in the following year for adjusting transactions which took place in the previous financial year. This is considered necessary in order to allow certain inter-departmental adjustments, corrections of misclassifications, clearance of certain transitory heads (Suspense Heads), and other relevant adjustments.


Monday, 15th Feb 2016, 11:23:56 AM

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