All India Rank holders

CMA FINAL CFR Marks Under Guidance of CA/CMA Santosh Kumar Sir

94 90 88 85 85 82
UTTAM INDER YUGANSHU EARLE
KUMAR DAS BISHT SANJAY BAHL AKSHAY RAMA

81 74 74 73 71 69
VAISHNAVI PRAGYA KASHFEE AKASH GUNJAN PRANAY
MD. AFZAL

66 65 64 64 64 62
ABHINAV SATYABRATA SNEH VIJAY SHREYA NIKHIL GOKUL G
GOPLKRISHNAN

62 61 61 61 60 60
RAJASHRI
NIMBALKAR
YOGESH PRASHANT MANASI
SANDEEP
CHIRAG ABHISHEK
SHARMA
CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

Government accounting

GOVERNMENT ACCOUNTING –
Government accounting may be defined as an accounting system used in government institution for the
purpose of recording, classifying, summarizing and communicating the financial information regarding the
collection and utilization of public funds and properties. It is concerned with keeping records of government
revenues and their expenditure in different development and administrative works. It is also referred to as
Public Finance Accounting.

FEATURES OF GOVERNMENT ACCOUNTING:

1. Specific system of accounting: It is a specific accounting system which is followed by government in its
departments, offices and institutions.
2. Reporting of utilisation of public funds: The accounting system used by government and its institutions
have to reveal how public funds and properties have been used for that people and society.
3. Government Regulations: Government accounting is maintained according to government rules and
regulations. The financial policies, rules and regulations as determined from time to time provide the
system of government accounting.
4. Double Entry System: Government accounting is based on the principles and assumptions of double entry
system of book keeping system.
5. Budget Heads: All the expenses of government offices are classified into different budget heads and
expenditures are made only on approved budget heads.
6. Budgetary Regulation: Government expenditures are governed by budgetary regulations. It means no
government office can make expenditure more than the amount allocated in the budget.
7. Mode of Transaction: All government transactions are supposed to be performed through banks.
8. Fund-based Accounting: The government is engaged in number of operations and activities which are quite
unrelated to each other. The particular sources of revenue or income often are dedicated to use for a
particular phase of the government’s operations. The accounts must segregate these specially dedicated
resources and isolate them from all other transactions in a separate “fund.”
9. Auditing: The audit of the books of accounts maintained by government departments, offices or institutions
are audited by CA&G of India.

OBJECTIVES OF GOVERNMENT ACCOUNTING: The specific objectives can be stated as under:

1. To record revenues and expenditure relating to the government organizations as per the appropriate Act,
Rules, and legal provisions as set by the government.
2. To provide reliable financial data and information about the operation of public fund.
3. To avoid the excess expenditures beyond the limit of the budget approved by the government.
4. To help in the preparation of various financial statements and reports.
5. To facilitate the auditing by the concerned government department.
6. To prevent misappropriation of government properties by maintaining the systematic records of cash and
store items.
7. To facilitate for estimating the annual budget by providing historical financial data of government and
expenditures.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

GENERAL PRINCIPLES OF GOVERNMENT ACCOUNTING:

The general principles of government accounting are highlighted hereunder:
1. Classification of expenditures: The Government Expenditures are classified under Sectors, major heads,
minor heads, sub-heads and detailed heads of account.

2. Based on budget: government accounting is based on the annual budget of the government. In its budget
for a year, Government is interested to forecast with the greatest possible accuracy what is expected to
be received or paid during the year.

3. End products of government accounting: In the field of Government accounting, the end products are the
monthly accounts and the annual accounts. The monthly accounts serve the needs of the day-to-day
administration, while the annual accounts present a fair and correct view of the financial stewardship of
the Government during the year.

4. Period of Accounts: The annual accounts of the central, state and union territory government shall record
transactions, which take place during financial year running from 1st April to 31st March.

5. Cash basis of accounting: The transactions in government accounts shall represents the actual cash receipt
and disbursement during a financial year.

6. Form of Accounts: The accounts of Government are kept in three parts namely, Consolidated Fund,
Contingency Fund and Public Account.

COMPARISON BETWEEN GOVERNMENT ACCOUNTING AND COMMERCIAL ACCOUNTING:

Basis Government accounting Commercial accounting
1. Meaning Applies to Government departments, Applies to Non-Government departments,
offices. offices
2. Objective is maintained for recording and reporting Is maintained to know the profit or loss for an
the utilisation of public funds. accounting period and disclose the financial
position of the entity.

3. Scope More elaborate than that followed in Less elaborate than that followed in
commercial accounts. government accounts.
4. Budget directly influenced by the government does not follow the government budgeting
budgeting system. system.
5. Basis Prepared on cash basis May be done on cash basis or accrual basis, or
hybrid basis.

6. Level of Government accounting has the system of Commercial accounting has no provision of
Accounting central level and operating level central level and operating level accounting.
accounting.
7. Rules and Strictly maintained by following the is maintained by following the applicable rules
Provisions: financial rules and provisions as set by the and the ‘Generally Accepted Accounting
concerned government Principles’ (GAAP).
8. Information: Government accounting provides Commercial accounting provides information
information to the government about the to the various stakeholders about the
receipts, deposit, transfer, and utilisation operating result and financial position of the
of public funds business.

9. Auditing: CA&G of India Professional auditors

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

GOVERNMENT ACCOUNTING AND REPORTING:

(I) Comptroller General of Accounts (CGA):
• is the apex accounting body in the Government of India.
• It is the principal Accounts Adviser to the Government of India and
• is responsible for establishing and maintaining a technically sound management accounting system.

(II) Pay and Accounts Office:

• The accounts of the Civil Ministries are compiled and maintained by the Pay and Accounts Offices.
• The Pay and Accounts Offices maintain line item wise accounts of all the transactions involving
Consolidated Fund of India, Contingency Fund of India and Public Account of India. Various subsidiary
accounts such as Loan accounts, Fund accounts etc. are also maintained by these units.
• The accounts compiled by the Pay and Accounts Offices are consolidated on a monthly basis in the
Principal Accounts Offices at the Ministry’s headquarters.
• The consolidated accounts of the Ministry are rendered to the Controller General of Accounts.

Role of Comptroller General of Accounts (CGA):

• The accounts received from various Ministries are consolidated in the office of the Controller General
of Accounts to generate the accounts of the Government of India as a whole.
• Consolidating monthly accounts of the Government of India and reporting on the fiscal deficit is the
primary responsibility of the CGA.
• The monthly accounts are compiled in the CGA office and a monthly review indicating flow of
expenditure, revenue collection, internal and external borrowing and fiscal deficit is prepared for
Minister of Finance.
• A summary of the monthly accounts is also placed on the web.
• He prepares a critical analysis of expenditures, revenues, borrowings and the deficit for the Finance
Minister every month.
• He also prepares annual Appropriation Accounts and Union Finance Accounts for presentation to the
parliament.
• Ministries, Departments approach the Controller General of Accounts for advice on accounting
procedures for new schemes, programmes or activities undertaken by them.
• The advice rendered by the CGA generally covers aspects related to maintenance of accounts,
collection of receipts and it’s crediting into Government account, release of payment and it’s
accounting, creation and operation of funds within Government accounts, banking arrangements for
making payments and collecting receipts etc.
• The advice of the Controller General of Accounts is binding on the Ministries/Departments.

Government Accounting & Information Technology: In a continuous effort towards improving the
efficiency and the quality of the services rendered by the Department, Information Technology has been
introduced at almost all levels of operations.
At the three levels, namely the Controller General of Accounts, Principal Accounts Offices and the field Pay
and Accounts Offices software packages, namely
• GAINS (Government Accounting Information System),
• CONTACT (Controller’s Accounts) and
• IMPROVE (Integrated Multimodule Processor for Voucher Entries),
are being used to consolidate Government of India Accounts.

Accounts of the Government:- The Constitution of India provides for the manner in which the accounts
of the Government have to be kept. The accounts of Government are kept in three parts namely. They are
discussed as under:

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

1. Consolidated Funds of India:

• The Consolidated Funds is constituted under Article 266(1) of the Constitution of India.
• All revenues received by the Government by way of taxes like Income Tax, Central Excise,
Customs, GST and other non-Tax Revenues are credited into the Consolidated Fund.
• Similarly, all loans raised by the Government by issue of Public notifications, treasury bills
(internal debt) and loans obtained from foreign governments and international institutions
(external debt) are credited into this fund.
• All expenditure of the government is incurred from this fund and no amount can be withdrawn
from the Fund without authorization from the Parliament. This is the largest of all the three funds.

2. Public Accounts of India:-

• The Public Accounts of India is constituted under Article 266(2) of the Constitution.
• It accounts for flows for those transactions where the government merely acts as a banker.
• Examples of those are provident funds, small savings etc. These funds do not belong to the
government. They have to be paid back at some time to their rightful owners.
• Because of this nature of the funds, expenditures from it are not required to be approved by the
parliament.

3. Contingency Funds of India:-

• The Contingency Fund of India Fund set by the Government of India under Article 267 of the
Constitution of India. It records the transactions connected with Contingency.

• Any expenditure incurred from this fund requires a subsequent approval from the parliament and
the amount withdrawn is returned to the fund from the consolidated fund.

• The contingency fund of India is used at a time when there is a crisis in the nation e.g natural calamity
and money is required to deal with it.

• The contingency fund of India is at the disposal of the president of India, who releases the funds on
request of the union cabinet, who later gets an approval from parliament. A parliament approval is
mandatory.

• It is held on behalf of President by the Secretary to the Government of India, Ministry of Finance,
Department of Economic Affairs.
• The corpus of this fund is ₹ 500 crores.

• Advances from the fund are made for the purposes of meeting unforeseen expenditure which are
resumed to the Fund to the full extent as soon as Parliament authorizes additional expenditure. Thus,
this fund acts more or less like an imprest account of Government of India.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

COMPTROLLER AND AUDITOR GENERAL OF INDIA (C&AG):

• The Comptroller and Auditor General (C&AG) of India is an authority, established by the Constitution
under Constitution of India, who audits all receipts and expenditure of the Government of India and
the state governments, including those of bodies and authorities substantially financed by the
government.
• The CAG is also the external auditor of Government-owned corporations and conducts
supplementary audit of government companies.
• Comptroller and Auditor General (C&AG) is the guardian or care-taker of the national purse.
• He is appointed by the President of India for tenure of 6 years.
• The Government of India Act of 1935, made the Auditor General of India irremovable except “in like
manner and on like grounds as a judge of the Federal Court.”
• Articles 148 to 151 of the Indian constitution create and regulate the office of Comptroller and
Auditor General of India. The office of the Comptroller and Auditor General is considered as “pivotal”
to the control of entire financial system of the country.

ROLE, FUNCTION AND DUTIES OF THE COMPTROLLER & AUDITOR GENERAL (C&AG):

1. C & AG to compile and keeping of accounts of Union and States.

2. C & AG to prepare and submit accounts to the President, Governors of States and Administrators of Union
territories having Legislative Assemblies.

3. Comptroller and Auditor General to give information and render assistance to the Union and States.
4. General provisions relating to audit: It shall be the duty of the CA&G :
• to audit all expenditure from the Consolidated Fund of India and to ascertain whether the moneys
shown in the accounts as having been disbursed were legally available for and applicable to the
purpose to which they have been applied.
• to audit all transactions of the Union and of the States relating to Contingency Funds and Public
Accounts;
• to audit all trading, manufacturing, profit and loss accounts and balance-sheets and other subsidiary
accounts kept in any department of the Union or of a State.

5. Audit of receipts and expenditure of bodies or authorities substantially financed from Union or State
Revenues:

6. In the case of grants or loans given to other authorities or bodies, the CA&G shall scrutinise the procedures
by which the sanctioning authority satisfies itself as to the fulfilment of the conditions subject to which
such grants or loans were given.

7. Audit of receipts of Union or of States: It shall be the duty of the CA&G to audit all receipts which are payable
into the Consolidated Fund of India and of each State and of each Union territory and to satisfy himself that
the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection
and proper allocation of revenue and report thereon.

8. Audit of accounts of stores and stock: The CA&G shall have authority to audit and report on the accounts
of stores and stock kept in any office or department of the Union or of a State.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

Powers of Comptroller and Auditor General in connection with audit of accounts : The CA&G
shall in connection with the performance of his duties under this Act, have authority:
• to inspect any office of accounts under the control of the union or of a State, including treasuries, and
such offices responsible for the keeping of initial or subsidiary accounts, as submit accounts to him;
• to require that any accounts, books, papers and other documents which deal with or form the basis of or
an otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent
to such place as he may appoint for his inspection;
• to put such questions or make such observations as he may consider necessary, to the person in charge
of the office and to call for such information as he may require for the preparation of any account or
report which it is his duty to prepare.

PUBLIC ACCOUNTS COMMITTEE (P.A.C):

• The Public Accounts Committee (P.A.C.) is a committee of selected members of Parliament,
constituted by the Parliament of India.
• In the Indian parliamentary form of governance, the legislature has the power to ensure “that the
appropriated money is spent economically, judiciously and for the purpose for which it was
sanctioned”. Even though the C&AG is to audit the accounts of the government and to ensure the
propriety of the money spent, yet its report is further examined by the special committee of the
parliament, is known as Public Account Committee.
• The Committee entrusted with the responsibility of examining the accounts of the Government. The
Government expenditures are thoroughly examined and ensured that the Parliamentary limits are
not breached.
• It examines the report of Accounts of the union government submitted by the C&AG, to the President
for the purpose of auditing of the revenue and the expenditure of the Government of India.

• The Public Accounts Committee ensures Parliamentary control over government expenditure.

• The Public Accounts Committee was first set up in India in 1921 under the Montague Chelmsford
Reforms.

• Presently, it is formed every year with a strength of not more than 22 members, out of which 15
members are from Lok Sabha (the lower house of the Parliament), and 7 members are from Rajya
Sabha (the upper house of the Parliament). The term of office of the members is one year.

Constitution of Public Accounts Committee (P.A.C):

The Committee consists of not more than 22 members comprising 15 members elected by Lok Sabha every
year from amongst its members according to the principle of proportional representation by means of single
transferable vote, and not more than 7 members of Rajya Sabha elected by that House in like manner are
associated with the Committee. Thus, the present P.A.C is a joint committee of the two Houses.

The Chairman is appointed by the Speaker of Lok Sabha from amongst its members of Lok Sabha. Since 1967,
the chairman of the committee is selected from the opposition.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

Role of Public Accounts Committee (P.A.C):

1. The chief function of P.A.C. is to examine the audit report of C&AG after it is laid in the Parliament.
2. In examining the report of the C&AG, the committee has to satisfy itself that:
• the expenditures made by the government, were authorized by the Parliament; and
• the expenditures under any head have not crossed the limits of parliamentary authorization.
3. The committee not only ensures that ministries spend money in accordance with parliamentary grants, it
also brings to the notice of the Parliament instances of wasteful expenditure and lack of financial integrity
in public services.
However, the committee cannot question the policies of the government. It only concerns itself with the
execution of policy on its financial aspects.

4. A new dimension has been added to the function of the P.A.C. by entrusting it with the responsibility of
scrutinizing the audit report of public corporations.

5. In examining the accounts and audits of the ministries and public corporations, the Committee gets the
opportunity to scrutinize the process of their working. It points out the weakness and shortcomings of the
administration of ministries and public corporations. Criticisms of the P.A.C. draw national attention. This
keeps the ministries and public corporations sensitive to the criticisms of the P.A.C.

GOVERNMENT ACCOUNTING STANDARDS ADVISORY BOARD (GASAB):

• GASAB was constituted by the Comptroller and Auditor General of India (C&AG) with the support of
Government of India through a notification dated August 12, 2002.
• This Board was constituted to establish and improve the standards of governmental accounting and
financial reporting, and enhance the accountability mechanisms.
• The decision to set-up GASAB was taken in the backdrop of the new priorities emerging in the Public
Finance Management and to keep pace with International trends.
• The new priorities focus on good governance, fiscal prudence, efficiency & transparency in public
spending.

Structure of GASAB:
The Board has high level representation from the important accounting heads in Government, Ministry of
Finance, Department of Post, Finance Secretaries of states, RBI and heads of premier accounting & research
organizations. The board consists of the following members:
1. Deputy Comptroller and Auditor General (Government Accounts) as Chairperson
2. Financial Commissioner, Railways
3. Member (Finance) Telecom Commission, Department of Telecom
4. Secretary, Department of Post
5. Controller General of Defence Accounts
6. Controller General of Accounts
7. Additional / Joint Secretary (Budget), Ministry of Finance, Government of India
8. Deputy Governor, Reserve Bank of India, or his nominee
9-12. Principal Secretary (Finance) of four States, by rotation
13. Director General, National Council of Applied Economic Research (NCAER), New Delhi
14. President, Institute of Chartered Accountants of India (ICAI), or his nominee
15. President, Institute of Cost and Works Accountants of India(ICMAI), or his nominee
16. Principal Director in GASAB, as Member secretary.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

Responsibilities of GASAB:- GASAB has the following responsibilities:

1. To propose standards that improve the usefulness of financial reports based on the needs of the users.
2. To formulate and improve standard of Government accounting and financial reporting in order to enhance
accountability mechanisms.
3. To keep the standards current and reflect change in the Governmental environment.
4. To provide guidance on implementation of standards.
5. To consider significant areas of accounting and financial reporting that can be improved through the
standard setting process.
6. To improve the common understanding of the nature and purpose of information contained in the financial
reports.

MISSION OF GOVERNMENT ACCOUNTING STANDARD ADVISORY BOARD (GASAB)

• The mission of the GASAB is to formulate and recommend Indian Government Accounting Standards
(IGASs) for cash system of accounting and Indian Government Financial Reporting Standards (IGFRS)
for accrual system of accounting.
• GASAB has been developing two types of Accounting Standards, namely Indian Government
Accounting Standards (IGAS) and Indian Government Financial Reporting Standards (IGFRS) for the
Government. These standards have been developed to address the issues related with the existing
cash system of accounting and its migration to the accrual system of accounting in future.

INDIAN GOVERMENT ACCOUNTING STANDARDS (IGAS):

• The standards being developed to make existing cash system of accounting more transparent are
called Indian Government Accounting Standards (IGAS).
• The Indian Government Accounting Standards (IGAS), formulated by the Government Accounting
Standards Advisory Board (GASAB) and notified by the Ministry of Finance, Government of India are:

➢ Guarantees given by Governments: Disclosure Requirements (IGAS 1);

➢ Accounting and Classification of Grants-in-aid (IGAS 2)
➢ Loans and Advances made by Governments (IGAS 3)

The Indian Government Accounting Standards (IGAS), approved by the Government Accounting Standards
Advisory Board (GASAB) and under consideration of Government of India, are:

➢ Foreign Currency Transactions and Loss/Gain by Exchange Rate Variations (IGAS 7);
➢ Government Investments in Equity (IGAS 9);
➢ Public Debt and Other Liabilities of Governments: Disclosure Requirement (IGAS 10).

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

IGAS – 1 GURANTEES GIVEN BY GOVERNMENTS: DISCLOSURE REQUIREMENTS

The Union Government and the State Governments give Guarantees for repayment of borrowings within such
limits, as may be fixed upon the security of the Consolidated Fund of India or of the State, as the case may
be, in terms of articles 292 and 293 of the Constitution.

Guarantees are also given by the Union Government:

• For payment of interest on borrowings, repayment of share capital;
• Payment of minimum annual dividend; and
• payment against agreements for supplies of materials and equipment on credit basis on behalf of the State
Governments, Union territories, local bodies, railways, Government companies or corporations, joint
stock companies, financial institutions, port trusts, electricity boards and co-operative institutions.

Guarantees are also given by the Union Government to the Reserve Bank of India, other banks and financial
institutions:
• For repayment of principal and payment of interest;
• Cash credit facility;
• financing seasonal agricultural operations; and
• For providing working capital in respect of companies, corporations, co-operative societies, and co-
operative banks.

Further, guarantees are also given in pursuance of agreements entered into by the Union Government with
international financial institutions, foreign lending agencies, foreign Governments, contractors and
consultants towards repayment of principal, payment of interest and payment of commitment charges on
loans.

➢ Guarantees normally constitute contingent liability of the Governments.

Objective: The objective of this Standard is to set out disclosure norms in respect of Guarantees given by
the Union, the State Governments and Union Territory Governments in their respective Financial Statements
to ensure uniform and complete disclosure of such Guarantees.

Scope: The scope of this standard is stated as under:

• This Standard applies to preparation of the Statement of Guarantees for inclusion and presentation in the
Financial Statements of the Governments.
• The Authority in the Government which prepares the Statement of Guarantees for inclusion and
presentation in the Financial Statements shall apply this Standard.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

Disclosure:
The Financial Statements of the Union Government, the State Governments and the Union Territory
Governments shall disclose the following:
• maximum amount for which Guarantees have been given during the year, additions and deletions
as well as Guarantees outstanding at the beginning and end of the year;
• amount of Guarantees invoked and discharged or not discharged during the year:
• details of Guarantee commission or fee and its realisation; and
• other material details.

The Financial Statements of the Union Government, the State Governments and the Governments
of Union Territories shall disclose in the notes the following details concerning class or sector of
Guarantees:
• limit, if any, fixed within which the Government may give Guarantee;
• whether Guarantee Redemption Reserve Fund exists and its details including disclosure of balance
available in the Fund at the beginning of the year, any payments made and balance at the end of the
year;
• details of subsisting external foreign currency guarantees in terms of Indian rupees on the date of
Financial Statements;
• details concerning Automatic Debit Mechanism and Structured Payment Arrangement, if any;
• whether the budget documents of the Government contain details of Guarantees:
• details of the tracking unit or designated authority for Guarantees in the Government; and
• other material details.

Effective date:
This Indian Government Accounting Standard becomes effective for Financial Statements covering
periods beginning on or after 1-4-2010.

Important Definitions:
• Accounting Authority: It means the Authority which prepares the Financial Statements of the Government
• Authority in the Government: It means the tracking (monitoring) unit or Authority for Guarantees and in its
absence, the Ministry or the Department of Finance, as the case may be.
• Automatic Debit Mechanism: It means the arrangement whereby the Government’s cash balance is affected
on a specified date or on the occurrence of specified events to meet certain obligations arising out of
Guarantees given by it.
• Structured Payment Arrangement: It means the arrangement whereby the Government agrees to transfer
funds to the designated account in case the beneficiary entity fails to ensure availability of adequate funds for
servicing the debts, as per stipulations.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

IGAS - 2 ACCOUNTING AND CLASSIFICATION OF GRANTS-IN-AID:

Introduction: Grants-in-aid are payments in the nature of assistance, donations or contributions

made by one government to another government, body, institution or individual. Grants-in-aid are
given for specified purpose of supporting an institution including construction of assets.

Such grants-in-aid could be given in cash or in kind used by the recipient agencies towards meeting
their operating as well as capital expenditure requirement.

Grants-in-aid are given by the Union Government to State Governments and by the State
Governments to the Local Bodies. This is based on the system of governance in India, which follows
three-tier pattern:
• With the Union Government at the apex (top),
• The States in the middle, and
• The Local Bodies (LBs) consisting of the Panchayati Raj Institutions (PRIs) and the Urban Local
Bodies (ULBs) at the grass root level.

Accounts of these three levels of Government are separate and consequently the assets and
liabilities of each level of government are recorded separately. Grants-in-aid released by the Union
Government to the State Governments are paid out of the Consolidated Fund of India as per Articles
275 and 282 of the Constitution.

Sometimes, the Union Government disburses funds to the State Governments in the nature of Pass-
through Grants that are to be passed on to the Local Bodies.

The State Governments are required to devolve funds to various Panchayati Raj Institutions (PRIs)
and the Urban Local Bodies (ULBs) upon them for discharging various functions such as education,
health, rural housing, drinking water, etc.

Objective: The objectives of this Standard is to prescribe the principles for accounting and
classification of Grants-in-aid in the Financial Statements of Government both as a grantor as well
as a grantee.

Scope: This Standard applies to the Union Government and the State Governments in accounting
and classification of Grants-in-aid received or given by them.

Recognition:
• Grants-in-aid in cash shall be recognised in the books of the grantor at the time cash
disbursements take place. Grants-in-aid in cash shall be recognised in the books of the grantee at
the time cash receipts take place.

• Grants-in-aid in kind shall be recognized in the books of the grantor at the time of their receipt by
the grantee. Moreover, it shall be recognized in the books of the grantee at the time of their
receipt by the grantee.
Disclosure:
• In order to ascertain the extent of Grants-in-aid disbursed by the grantor to the grantee for the
purpose of creation of capital assets, the Financial Statements of the grantor shall disclose the
details of total funds released as Grants-in-aid and funds allocated for creation of capital assets
by the grantee during the financial year, in the form of an Appendix to the Financial.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

Effective Date: This Indian Government Accounting Standard becomes effective for the Financial
Statements covering periods beginning from 1.4.2011.

IGAS — 3 LOANS AND ADVANCES MADE BY GOVERNMENT

Introduction:

The Union Government has been providing financial assistance to the State Governments, a
substantial portion of which is in the form of loans. These loans are advanced to the States both in
the form of plan and non-plan assistance intended for both developmental and non-developmental
purposes.

Loans are also provided by the Union Government to Foreign Governments, Government
companies and Corporations, Non-Government institutions and Local bodies. The Union
Government also disburses recoverable advances to Government servants.

The State Governments disburse loans to Government Companies, Corporations, Local Bodies,
Autonomous Bodies, Cooperative Institutions, Statutory Corporations, quasi-public bodies and
other non-Government/private institutions. The State Governments also disburse recoverable
advances to Government servants.

Objective: The objectives of the Standard are:

• to lay down the norms for Recognition, Measurement, Valuation and Reporting in respect of Loans
and Advances made by the Union and the State Governments in their respective Financial
Statements to ensure complete, accurate, realistic and uniform accounting practices, and

• to ensure adequate disclosure on Loans and Advances made by the Governments consistent with
best international practices.

Important Definitions:

• Charged and Voted Loans and Advances: All loans to State Governments and Union Territory
Governments made by the Union Government are ‘charged’ loans whereas all other loans and
advances are ‘voted’ loans and advances.

• Loanee Entity: It is an entity in whose favour a loan or an advance is sanctioned by the Government.

Recognition:
• A loan shall be recognized by the disbursing entity as an asset from the date the money is actually
disbursed and not from the date of sanction and if a loan is disbursed in installments then each
installment shall be treated as a separate loan for the purpose of repayment of principal and
payment of interest, except where the competent authority specifically allows consolidation of
the installments into a single loan at the end of the concerned financial year.

• The loans converted into equity shall be treated as conversion and shall lead to a reduction in the
outstanding loan amount.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

• The debt assumption due to invocation of guarantees shall be treated as disbursement of loan,
unless otherwise so specified.

Measurement and Valuation:

• Historical Cost measurement shall be the basis for accounting and reporting on loans and
advances made by Governments.

• As of the last date of accounting period of Financial Statements, the carrying amount of loans shall
undergo revision on account of additional disbursement and repayments or write-offs during the
accounting period.

Disclosure:
• The Financial Statements of the Union and State Governments shall disclose the Carrying Amount
of loans and advances at the beginning and end of the accounting period showing additional
disbursements and repayments or write-offs.
• An additional column in the relevant Financial Statements shall also reflect the amount of interest
in arrears and this amount shall not be added to the closing balance of the loan which shall be in
nature of an additional disclosure.

The Financial Statements of the Union Government shall disclose the following details under ‘Loans
and Advances made by the Union Government’ in the Annual Finance Accounts of the Union
Government:
✓ the summary of Loans and Advances showing Loanee group-wise details;
✓ the summary of Loans and Advances showing Sector-wise details;
✓ The summary of repayments in arrears from Governments and other loanee entities.

The Financial Statements of the Union Government shall disclose the following details under ‘Detailed
Statement of Loans and Advances made by the Union Government in the Annual Finance Accounts of
the Union Government –
✓ the detailed statement of Loans and Advances showing the Major Head;
✓ the detailed Statement of repayments in arrears from State or Union territory Governments;
✓ the detailed Statement of repayments in arrears from other Loanee entities.

Effective Date: This Indian Government Accounting Standard becomes effective for the Financial
Statements covering periods beginning from 1.4.2011.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

IGAS — 7 FOREIGN CURRENCY TRANSACTIONS AND LOSS OR GAIN BY EXCHANGE RATE

VARIATION

Introduction: Indian rupee is the reporting currency for the financial statements of the
Government.

Objective: The objective of this standard is to provide accounting and disclosure requirements of
foreign currency transactions and financial effects of exchange rate variations in terms of loss or
gain in the financial statements.

Scope: The Accounting Authority which prepares and presents the financial statements of the
Government under the cash basis of accounting should apply this Standard:
(a) in accounting and disclosure for transactions in foreign currencies;
(b) in accounting and disclosure for financial effects of exchange variations in terms of loss or gain
by exchange rate variation, and
(c) in disclosure of foreign currency external debts and the rate(s) applied for disclosure.

➢ Financial statements should not be described as complying with this Standard unless they
comply with all its requirements.

A foreign currency transaction of Government shall be reported in the reporting currency by

applying to the foreign currency amount, exchange rate between the reporting currency and the
foreign currency at the date of receipts and payments.

Treatment of Loss or Gain by Exchange Rate Variation:

• All losses or gains by exchange rate variation in respect of Government transactions in foreign
currencies shall be recognised as revenue loss or gain.

Disclosure:
The financial statements shall disclose the following details of foreign loans in the format given:
(a) loans outstanding on historical cost basis at the beginning and end of the year;
(b) loans outstanding on closing rate basis at the beginning and end of the year;
(c) loans outstanding in foreign currency units at the beginning and end of the year;
(d) additions during the year in foreign currency terms and in Indian Rupee along with the rate of
exchange adopted;
(e) discharge during the year showing separately the amounts in foreign currency units, on
historical basis and (f) current rate of exchange basis;
(g) loss or gain on repayment of loans due to variation of exchange rate;
(h) interest paid on external debt; and
(i) closing rate of exchange applied.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

IGAS — 9 GOVERNMENT INVESTMENTS IN EQUITY

Introduction:
The Union Government, State Governments, and Governments of Union Territories make
investments in entities like Government companies, Statutory Corporations, other Joint Stock
Companies and Cooperative Banks/ Societies, international bodies and authorities like the
International Monetary Fund, Asian Development Fund, and International Finance Corporation.

Objective:
The objective of the Standard is to lay down the norms for recognition, measurement, and reporting
of investments of the Government in the Financial Statements so that the financial statements
provide a true and fair view of investments of the Government, consistent with best international
practices.

Scope: This Standard applies only to government accounts being maintained on a cash basis.
It applies to investment in equity of the investee entities and not in debt, like debentures, bonds.

Recognition:
An investment in equity shall be recognised by the Government as an asset from the date on which
the investment details are entered in the books of the investee entity.

Loans converted into equity shall be treated as equity investments from the date on which such
conversion takes plate, i.e. from the date on which details of conversion are entered in the books of
the investee entity.

Measurement:
• The method of initial measurement of investments in the financial statements of the
Government is the historical cost of the investment.
• Historical cost of Bonus shares is nil as there is no payment of cash.
• In case the Government acquires equity shares in consideration of any other asset, e.g.,
land, the historical cost of such investment shall be the face value of the equity shares.
• Historical cost of equity shares acquired on conversion of loans is the amount of the loan
outstanding (principal and interest) against which such shares are allotted.
• Investments subsequent to initial measurement shall also be reflected in the financial
statements at historical cost.
• The total amount of investments on the last date of an accounting period shall be the
investments at the beginning of the period with additions and disinvestment / sale of
investments during the period.

Disclosure:
➢ The Financial Statements of the Government shall disclose the amount of investments at the
beginning and at the end of the accounting period showing additional investments,
disinvestments / divestments or retirement /write town of capital / transfer of share, if any.
➢ The amount of dividend received shall be reflected as revenue of the period.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

IGAS — 10 PUBLIC DEBT AND OTHER LIABILITIES OF GOVERNMENTS: DISCLOSURE

REQUIREMENTS:

Introduction:
In terms of Article 292 of the Constitution, the executive power of the Union extends to borrowing
upon the security of the Consolidated Fund of India within such limits, if any, as may from time to
time be fixed by Parliament by Law.
Article 293(1) of the Constitution provides a similar provision in respect of State Governments.

Objective: The objective of the IGAS 10 is to lay down the principles for identification, measurement
and disclosure of public debt and other obligation of Union and the State Governments including
Union Territories with legislatures in their respective financial statements.

Scope: The proposed IGAS shall apply to the financial statements prepared by the Union and State
Governments and Union Territories with legislature.

Measurement & Valuation:

The Public Debt and Other Obligations incurred by Governments shall be accounted and reported
on the basis of Face Value.

Disclosure:
The financial statements of the Union Government, State Governments and the Union Territories
with legislature shall disclose the following details concerning Public Debt and other obligations:
(a) The opening balance, additions and discharges during the year, closing balance with respect to
internal debt;
(b) The opening balance, additions and discharges during the year, closing balance and net change
in rupee terms with respect to external debt, wherever applicable;
(c) The opening balance, receipts and disbursements during the year, closing balance and net
change in rupee terms with respect of other obligations.
(d) Interest paid by the governments on public debt, small saving, provident funds, and reserve
funds and on other obligations.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142

CMA FINAL CFR MARATHON SERIES CA/CMA Santosh kumar

INDIAN GOVERNMENT FINANCIAL REPORTING STANDARDS (IGFRS)

The standards being developed for accrual system of accounting in the Government are called the
Indian Government Financial Reporting Standards (IGFRS).

Accrual based Accounting Standards, i.e., Indian Government Financial Reporting Standards
(IGFRS), approved by the Government Accounting Standards Advisory Board (GASAB) under
consideration of Government of India:
• IGFRS 1: Presentation of Financial Statements
• IGFRS 2: Property, Plant & Equipment
• IGFRS 3: Revenue from Government Exchange Transactions
• IGFRS 4: Inventories
• IGFRS 5: Contingent Liabilities (other than guarantees) and Contingent Assets: Disclosure Requirements.

COCEDUCATION.COM Enquiry No: 9999631597, 7303445575, 8448322142