Estimates of Gross Domestic Product for the Second Quarter (July-September) of 2018-19, Ministry of Statistics and Programme Implementation Click here

Cash based Accounting System Versus Accrual Accounting System

From Arthapedia
Jump to: navigation, search

The Indian Government accounts are prepared on a cash based accounting system. This system recognizes a transaction when cash is paid or received. However it does not give a realistic account of government's financial position because it lacks an adequate framework for accounting for assets and liabilities, and depicting consumption of resources. Moreover capital expenditure (expenditure on the creation of new assets) under the cash system is brought to account only in the year in which a purchase or disposal of an asset is made. This is not an effective way to track assets created out of public money. The present system does not reflect accrued liabilities arising from the gap between commitments and transactions of government on the one hand and payments made. The Twelfth Finance Commission recommended introduction of accrual accounting in Government. Government has accepted the recommendation in principle and asked Government Accounting Standards Advisory Board (GASAB) in the office of the Comptroller and Auditor General of India to draw a roadmap for transition from cash to accrual accounting system and to prepare an operational framework for its implementation. So far twenty one State Governments have agreed in principle to introduce accrual accounting.


References

  1. http://www.gasab.gov.in/about.asp


Contributed by

Personal tools
Variants
Actions
Navigation
Concepts
Share Tools
Toolbox
Translate