ACCOUNTING MANUAL

FOR URBAN LOCAL BODIES IN TAMILNADU

GOVERNMENT OF TAMILNADU

MUNICIPAL ADMINISTRATION & WATER SUPPLY

DEPARTMENT
 Accounting Manual for Urban Local Bodies

Table of Contents

Chapter no Subject
01 Introduction
02 Taxes and Fees Accounting
a) Property Tax - Accounting
b) Other Taxes & Fees – Accounting
03 Cash and Bank Accounting
04 Staff Salaries & Recoveries
a) Salaries Accounting
b) Provident Fund – Accounting
c) Retirement Benefits Accounting
05 Expenses Accounting
06 Suppliers / Materials – Accounting
07 a) Stores Accounting
b) Asphalt Accounting
c) Petrol / Diesel Accounting
08 Contractors’ Accounting
09 Projects and Fixed Assets Accounting
10 Loans and Grants Accounting
11 Deposits and Advances Accounting
12 Water Supply and Drainage Fund Accounting
13 Preparation of Opening Balance Sheet
14 Compilation of Accounts
15 Appendix – I
16 Appendix - II
 ACCOUNTING MANUAL FOR URBAN LOAL BODIES IN TAMILNADU

VOLUME – I

Chapter – 01

INTRODUCTION:

The Urban Local Bodies viz., Municipal Corporations, Municipalities and Town
Panchayats other than the Corporation of Chennai are at present maintaining their
accounts on cash basis. The receipts actually received and payments actually make, under
various prescribed heads of account, based on the nature of receipts and payments are
accounted for, in the form of a statement of Receipts and Payments. So, the annual
account prepared reflects only a cash flow, i.e., money actually received and spent during
a financial year without taking into account, the accrued income and outstanding
liabilities pertaining to the year. In addition to the statement of receipts and payments
duly supported by necessary adjustments and transfer entries for Revenue Fund (Ordinary
account) and Capital Fund (Capital Account), a Demand, Collection and Balance
Statement (D.C.B Statement) for taxes, fees and other revenue items is also being
annexed to the Annual, besides a Statement of Assets and Liabilities, which of course,
has not assumed its importance in the present set of accounts, as the Statement showing
Assets and Liabilities is not prepared in the form of Balance sheet to represent the true
financial status of the Municipality.

2. The word ‘Municipality’ or ‘Municipal’ wherever used in this manual, will also refer
to the Municipal Corporation, if the context so requires.

3. The word ‘Manager’ wherever used in this Manual will refer to the ‘Administrative
Officer’ in the Zone and the Assistant Commissioner (Accounts) in the main office of the
Corporation.

2. ACCRUAL SYSTEM OF ACCOUNTING”

(a) It has been decided to replace the present accounting system by the accrual
system of accounting. This accrual accounting system is aimed at making it to
conform to the generally accepted accounting principles (GAAP). In the accrual
system, transactions are accounted in the period to which they relate.

(b) In this system, there is a change in reporting the financial results so as to provide
the Chief Executive (the Commissioner), the Council and the Government with
the Financial Reports, in the form of tow important financial statements for the
purposes noted against each.
i) INCOME & EXPENDITURE ACCOUNT: to determine the financial performance of
the Municipality

ii) BALANCE SHEET : to assess the financial status of the

Municipality

(c) This necessitates a change in the present system of accounting i.e. from single
entry cash basis to a double entry accrual basis of accounting.

(d) This facilitates meaningful comparison of financial statements relating to different

periods.

3. GENERAL INSTRUCTIONS AND ACCOUNTING PRINCIPLES OF ACCRUAL

SYSTEM:

(a) (i) The Financial Statements of the Urban Local Bodies (i.e. the Income and
Expenditure Account and the Balance sheet) shall be prepared on accrual basis.

(ii) The accounting policies shall be applied consistently from one financial year
to the next, as approved by the Government. Any change in the accounting
policies which has a material effect in the current period or which is reasonably
expected to have a material effect in later periods, shall be disclosed. In case of a
change in the accounting policy, which has a material effect in the current period,
the amount by which any item in the financial statements is affected by such a
change, shall be disclosed to the extent ascertainable. When such amount is not
ascertainable, wholly or in part, the fact shall be indicated.

(iii) ‘Provision’ shall be made for all common liabilities and losses, even though
the amount cannot be determined with certainty and represents only a best
estimate in the light of available information. ‘Revenue’ shall not be recognized
unless,

(1) the related performance has been achieved,

(2) no significant uncertainty exists regarding the amount of the
consideration and
(3) it is not unreasonable to expect estimated collections.

(iv) The accounting treatment and presentation in the Income and Expenditure
Account and the Balance Sheet of the transactions and events shall be governed
by their substance and not merely by the legal form.
(v) In determining the accounting treatment and manner of disclosure of an item
in the Income and Expenditure Account and / or the Balance Sheet, due
consideration shall be given to the materiality of an item.

(vi) ‘Notes’ to the Income and Expenditure Account and the Balance Sheet shall
contain only the explanatory material pertaining to the items in the Income and
Expenditure Account and the Balance Sheet.

(vii) A statement of all ‘significant accounting policies’ adopted in the preparation

of the Income and Expenditure Account and the Balance Sheet, shall be included
in the Municipality’s balance sheet. Where any of the accounting policies is not in
conformity with accounting standards and the effect of departures from
accounting standards is material, the particulars of the departure shall be
disclosed, together with the reasons therefore and the financial effect thereof,
except where such effect is not ascertainable.

(viii) If the information required to be given under any of the items or sub items
cannot be conveniently included in the Income and Expenditure Account or the
Balance Sheet itself, as the case may be, it can be furnished in a separate schedule
or schedules to be annexed to and forming part of the Income and Expenditure
Account or the Balance Sheet itself, as the case may be, it can be furnished in a
separate schedule or scheduled to be annexed to and forming part of the Income
and Expenditure Account and the Balance Sheet. This is recommended where the
items are numerous.

(ix) The schedule referred for above, accounting policies and explanatory notes
shall form an integral part of the Balance Sheet.

(x) The corresponding amounts for the immediately preceding financial year for
all items shown in the Income and Expenditure Account or the Balance sheet also
be given in the Income and Expenditure Account or the Balance Sheet as the case
may be.

(xi) ‘PROVISION’ means any amount written off or retained by way of providing
for depreciation, renewals or diminution in value of assets or retained by way of
providing for any known liability, the amount of which cannot be determined with
substantial accuracy.

(xii) The figures in the Income and Expenditure account and the balance sheet, if
rounded off, shall be rounded off as below:
 Amount of Transactions (in Rs.) Rounding off to
Less than one lakh Rs.
One lakh or more but less than one crore Hundred
One crore or more but less than one hundred crores Thousand
One hundred crores or more but less than one Lakh
thousand crores
One thousand crore or more Crore

(xiii) As cash flow statement as formulate in AF III in volume III shall be

(b) It is, proposed to adopt this system,

(i) to distinguish between Revenue Fund and Capital Fund on the basis of
nature of transactions.
(ii) To continue ‘Funds Concept’ of accounting under broad categories.
(iii) To value / capitalize the Assets and to provide for depreciation every year
at the prescribed rates.
(iv) To create SINKING FUND, if possible
(a) for repayment of Government loans, and loans obtained from the
financial institutions
(b) for investing such Funds.
Explanation: The concept of Sinking Fund is explained in
Sl. no. 61 under paragraph 9 – ‘General Definition’

(v) to provide for doubtful Revenue items of Taxes, fees and others
(vi) to maintain subsidiary ledgers for those accounts which need to be
analysed in detail
(vii) to close the account books on monthly basis by preparing the prescribed
primary records, namely receipts boos, payments book and general ledger
(viii) To prepare a monthly Trial balance, the income and expenditure account
and the balance sheet annually/

Explanation:
The key functions of the Municipality can be grouped mainly under Capital Fnd
are Revenue fund. This presentation is for
(i) Assets and facilities creation and
(ii) Administration / maintenance of these assets and facilities to
render various services
(ix) The above system shall apply to the Water Supply & Drainage Fund and
Elementary Education Fund.

(c) (i) The following accounts will be continued to be kept separately as at present:

1. Provident Fund Account

2. Spl. Provident Fund cum Gratuity Scheme Account
3. Endowments Fund Account
 4. Tamilnadu Govt. Nutritious Meals account
5. Nehru Rozgar Yojana Account
6. Tamilnadu Govt. Welfare scheme
(Separate Accounts) Accounts

(ii) Some of the above Fund Accounts have trusted nature for their use for specific
purposes only. The municipal commissioner is executing some other Govt. Schemes i.e.
he receives money and disburses it according to the norms prescribed by the Govt. The
statements of receipts and payments shall be enclosed to the balance sheet in such cases.

(iii) In respect of the Assets, if any, created out of the Funds referred to in Sl. No. 4&5
above and similar scheme accounts, and ordered to be the properties of the Municipality,
for their maintenance, they may have to be taken as the Assets of the Municipality.

4. Accounting Manual:

(a) This Accounting Manual is meant, for learning, by the staff members and officers in
the Municipalities, this Accrual System and its implementation. This manual does not
encroach upon any policy implementation and the administrative system, now in force,
nor does it suggest any revision in the Tax structure and other items of revenue for
improving the finance. This manual is confined to various procedures / steps to be
followed in compiling the Municipal account under accrual system.

(b) (i) The implementation of this new improved accounting system will not be the sole
responsibility of the Accounts Cell of the Municipality

(ii) Necessary changes in the working of the other departments like Revenue,
Engineering, Public health etc, to assume responsibilities for supporting the successful
implementation of this accounting system are dealt with in the succeeding chapters of this
manual.

(iii) The compilation of the Accounts under this system, therefore, involves the periodical
inflow of inputs from all the departments / sections of the Municipality. So, the
departmental officers are collectively responsible for the compilation of accounts in time.

5. Double Entry Accounting System:

(1) Account-keeping is a system of recording the effect of each financial transaction

under appropriate accounts, for purposes of easy comparison with past performances and
for comparison, to project for future development or improvement. The combined effect
of all such transactions of a year is to arrive at the net result of the activities or services
rendered to the public by the Municipality and to ascertain promptly the accurate
financial position.

(2) The ‘financial transaction’ means either the receipt of a benefit in the shape of cash,
goods or services or imparting of such benefit. Thus, every transaction has got a two-fold
effect. It results in dealing with a number of persons or films, goods, cash, furniture and
other assets or possessions, incurring certain operational and administrative expenses
such as salaries to the staff, wages, purchases, advertising, stationery and printing,
postage etc and also deriving Income from certain specified sources such as collection of
taxes, fees, etc, under relevant statutes.

(3) Double Entry Accounting system is, thus, a system of account keeping, by which,
both the receiving and the giving benefit of each transaction are recorded at a time.

6. Debit and Credit:

(a) The Double Entry Accounting system consists of

(i) Personal accounts
a) Property or Real Accounts and
b) Nominal or Fictitious Accounts

All these accounts will reflect in the form of debit and credit balances, depending upon
exact nature of the transactions and the will affect the accounts in opposite directions.

In order to make a complete record of each transaction, it becomes necessary to debit one
account and credit another account. It is this recording of two-fold effect of each
transaction that is termed as ‘Double Entry’. In other words, for every debit, there should
be a corresponding credit.

(b) Rules for Debit and Credit:

The rules of debit and credit in respect of the above three classes of accounts are as
indicated below:

i) Personal Accounts Debit the receiver and Credit the giver

ii) Asset or real accounts Debit what comes in and Credit what goes
out
iii) Nominal or fictitious accounts Debit expenses and losses and credit gains
and income

These rules shall never vary and as such, they have to be strictly followed:

7. Double Entry Accounting System vs. Single Entry Accounting System:

(a) It is explained below, how the double entry accounting system varies form the
Single entry accounting system:

Double Entry Accounting System Single Entry Accounting System

1 Both personal and impersonal Only the personal accounts (Debtor
accounts are reflected in this system and Creditor) are reflected in this
 system
2 All kinds of transactions are recorded Only transactions that relate to
in the Subsidiary books personal accounts are recorded
3 This system is a fool-proof one Single entry is not a system by itself
and it is only an incomplete and
disjointed form of double entry
system
4 This has a two-fold effect of a Single entry accounting ignores the
transaction, as every debit has got a two fold effect of the transactions
corresponding credit
5 A ‘Trial Balance’ can be prepared to This is not possible in this system
test the arithmetical accuracy of the
system
6 The income and expenditure account In the absence of nominal accounts,
could be prepared no classified information is available
regarding the gains or the losses and
hence no income and expenditure
account could be prepared.
7 The balance sheet could be prepared, Similarly, in the absence of real or
based on the Income and Expenditure property accounts, no information
Account to assess the financial status regarding the various assets could be
of the Municipality ascertained, as a result of which the
Balance Sheet could not be prepared
to find out the financial status of the
Municipality. At best, a statement of
affairs could be prepared
8 Detailed information is available for Detailed information is lacking for
comparative study comparative study
9 Since, ‘IN-BUILT CROSS CHECKS’ Fraud is easily committed. And it is
are available, it will be rare to commit very difficult to detect it
fraud. Even if committed, it canbe
detected quickly
10 Demands are raised for all taxes and Since no demand is raised and
non-taxes (Fees, leases and rent) and accounted for, independently in the
hence a D.C.B. statement could be Accounts Cell, the D.C.B. statement
prepared independently in the could be prepared, only by
Accounts Cell maintaining the Demand Registers
separately in the Revenue Branch

(b) Double entry accounting system shall account for, all income, whether received or
accrued and all expenses whether paid or outstanding in a financial year. The
accounting system further enables preparation of ‘Trial Balance’ at the end of
every month of the financial year. Consequently the Income and Expenditure
Account is prepared, which will be accompanied by its relative Balance sheet for
that year.
 (c) The Income & Expenditure Account will reflect a real financial performance in a
year facilitating a comparative study of performance with the previous year,
enabling the municipal administration to take corrective and remedial measures
by the Council and the Government.
(d) While the Revenue items, - both Income and Expenditure – are listed out and
taken away from the Trial Balance with necessary adjusting entries, for
preparation of Income and Expenditure Account, to find out Net surplus /
Deficiency, there are certain other items – debit and credit balances – left out in
the Trial Balance. These items, that are thus left out, shall represent the assets
employed or created and deployment of finances derived from different sources.
(e) These items will be set out in the form of a statement to find out that the
Municipality is running on sound lines and the financial liquidity is maintained.
This statement is generally called the ‘Balance Sheet’. It is, otherwise, known as
‘Statement of Assets and Liabilities.

8. Cash Basis vs. Accrual Basis:

A. General Description:

(i) Cash Basis:

The method of recording transactions by which Revenue, Costs, Assets and
Liabilities are reflected in the accounts in the period in which actual receipts or actual
payments are made. While the cash basis is the product of Single Entry Accounting
System, the Accrual Basis is an integral part of the Income and Expenditure Acount

(ii) Accrual Basis:

The method of recording transactions by which Revenue, Costs, Assets and
Liabilities are reflected in the Accounts in the period in which they accrue. The
Accrual basis of accounting includes considerations, relating to deferrals, allocations,
depreciation and amortisation.

B. The following are the main differences between Cash Basis and Accrual Basis

(1) Cash Basis:

1. A statement of Receipts and Payments only could be prepared, based on
actual cash receipts and cash payments, recorded in the Cash Book of a
year.
2. There will not be any distinction between Capital and Revenue receipts or
payments.
3. This statement viz, receipts and payments statement will commence with
the opening balance – both cash on hand and cash at bank
4. This statement need not necessarily be accompanied by a statement of
Assets and Liabilities
5. The difference between the two sides – debit and credit – will indicate the
cash balance at the end of the period.
 (2) Accrual Basis:

1. The Income and Expenditure Account is prepared

2. There is, always, distinction between Capital and Revenue items of
receipts and payments.
3. The Income and Expenditure Account shall include Revenue items only
4. This system shall not commence with any balance
5. It shall necessarily include all income received or accrued and expenses
paid or outstanding in a year
6. The Income and Expenditure Account is confined to the year of
accounting only and it will not include the items of Income and
Expenditure – past and future years.
7. The difference between the two sides - debit and credit – will indicate the
Net Surplus / Deficiency
8. This system shall, necessarily have the Balance Sheet

C. Examples:

(1) ‘Income’ from properties (shopping complex) 1999 - 2000

(Items watched through the Miscellaneous Demand Register)

Income due for the previous year Rs. 20,000

(Arrear Demand Register)

Income due for the current year Rs. 1,20,000

(Current Miscellaneous Demand Register)

Income actually received in the year

Arrears Rs. 5,000
Current Rs. 10,000

Cash Basis Accrual Basis

Receipts Rs. 15,000 Income Rs. 1,20,000
(5,000 + 10,000)

(2) ‘Expenditure’ Insurance premium paid for public health lorry

(for one year from 1.9.99 to 31.8.2000) Rs. 11,800

Expenditure relating to 1999-2000 Rs. 6,883

Expenditure relating to 2000-2001 Rs. 4,917

Total Rs. 11,800

Cash Basis Accrual Basis
Expenditure Rs. 11,800 Expenditure for the
Current year Rs.6,883
Prepaid expenses Rs. 4,917
(Expenditure relating to next year)

(3) (a) Thus, there are differences in accounting of the above financial transactions (one
receipt item, and one payment item) on cash basis and on Accrual Basis

(b) While, the amount actually received and the amount actually spent are respectively
recorded as ‘Receipts and Payments’ in the year in which it is received and spent, in the
cash system, the income due (either received/collected in full or not) and the expenditure
relating to the year of accounting namely viz. 1999-2000 only are taken into account, in
the accrual system.

(c) In the accrual basis of accounting system, regarding the income, the difference
between the income due – here it is called Demand and left uncollected (Rs. 1,20,000 –
Rs. 10,000) Rs. 1,10,000 and regarding the expenditure, the insurance premium amount
paid in advance of the current year i.e. for the next year (11,800 – 6,883) Rs. 4, 917/- will
appear in the Balance sheet on the Asset side.

(4) The flow of transactions for these items is explained below:

1. a) As soon as the demand for the current year 1999-2000 under ‘Income from
Properties’ is confirmed by the Council or the Commissioner, a General Journal Voucher
(GJV) is prepared and the Income due is accounted for, with the following entry in the
General Ledger.

Dr. Cr.
Lease Amount Recoverable – Current Rs. 1,20,000
Rent on buildings (shopping complex) Rs. 1,20,000

(Being the amount of rent fixed as ‘demand’ for the shopping complex for the year 1999-
2000 as confirmed by the council, recoverable from Thiru X. lessee)

b) As and when the amount received in monthly instalments during the year, the same is
brought to account through Bank Receipt Voucher (BRV)

Dr. Cr.
Bank A/c Rs. 15,000
Lease Amount Recoverable – Current Rs,.10,000
Lease Amount Recoverable – Arrears Rs. 5,000
(Being the first instalment of lease amount collected for April ’99 and the other being the
collection of lease amount of the year 1998-99)
(c) Besides making entries in the Receipts book, for Cash / Cheque received and
accounted through BRVs, all the above Journal entries are recorded in the General
Ledger. The General Ledger balances under the four heads of account will be extracted
and recorded in the Income and expenditure account as follows:

Entries in the General Ledger

Detailed Head Dr. Cr.
Lease amount recoverable – current 1,10,000
Rent on buildings (shopping complex) 1,20,000
Lease amount recoverable – arrears 5,000
Bank Account 15,000
-----------------------------
1,25,000 1,25,000

Note: The collection of arrear of Rs.5,000 in the Current year will affect the ‘recoverable
amount’ exhibited in the Opening Balance Sheet, representing previous year’s arrears
under ‘Asset’

Income and Expenditure Account for 1999-2000

Expenditure Income
By rent on buildings 1,20,000
(Shopping Complex)

Balance Sheet as at 31.3.2000

Liabilities Assets
Lease amount recoverable 1,10,000
Current
Lease amount recoverable 15,000
Arrear
2. (a) When the claim for paying the insurance premium amount is received by the
Municipal Health Officer (who is incharge of the lorry) based on the premium notice of
the Insurance Company, the correctness of the claim is satisfied with reference to the
relevant records. Then, the Journal Voucher – here, Expenses Journal Voucher (EJV) is
prepared and the following Journal Entry is passed

Dr. Cr.
Heavy Vehicle – Maintenance A/c 6,883
Pre-paid expenses A/c 4,917
Accounts payable A/c – Expenses 11,800
--------------------------
11,800 11,800

(Being the insurance premium for the year 1.9.99 to 31.8.2000 paid beyond the
accounting period of 1999-2000)
(b) When the cheque is drawn in favour of the insurance company, the following debit
entry is passed in the Bank Payment Voucher (BPV), by making relevant entries in the
‘Payments Book’

Accounts payable A/c – Expenses 11,800

(c) All the above entries are recorded in the General Ledger and the balances extracted.
The balances so arrived at, are recorded in the Income and Expenditure Account as
follows:

Head of account Dr. Cr.

Heavy vehicle – Maintenance A/c 6,883
Pre-paid expenses 4,917

Income and Expenditure Account

Expenditure Income
Heavy Vehicle Maintenance Rs. 6,883

Balance Sheet as at 31.3.2000

Liabilities Assets
Pre-paid expenses 4,917
(Insurance)

3. Of the balance, in Sl. no. (1) and (2) above, the following items will appear in the
Balance Sheet as indicated below, subject to further accounting treatment in the year
(2000-2001)

Balance Sheet as at 31.3.2000

Liabilities Assets Rs.
1. Lease amount Rs. 15,000
recoverable (Arrears)
2. Lease amount Rs. 1,10,000
recoverable (Current)
3. Pre-paid expenses 4,917

9. General Definitions:

The important terms (including phrases) commonly used are explained here under, with a
view to facilitate a broad and basic understanding of these terms as well as to promote
consistency and uniformity in their usage.

1, Accounting Policies:

The specific accounting principles and the methods of applying those principles adopted
by an organization in the preparation and presentation of financial statements.
2. Account Receivable:

Person from whom amounts are due for goods sold or services rendered or in respect of
contractual obligations. Also it is termed as ‘debtor’

3. Accrual:

Recognition of revenue and costs as they are earned or incurred (and not as money is
received or paid). It includes recognition of transactions relating to ‘Assets’ and
‘Liabilities’ as they occur, irrespective of the actual receipts or payments.

4. Accrual basis of accounting:

The method of recording transactions by which ‘Revenues’ costs, assets and liabilities are
reflected in the accounts in the period in which they accrue. The ‘Accrual Basis of
Accounting’ includes considerations relating to ‘deferrals’, allocations, depreciation and
amortisation. This basis is also referred to as ‘Mercantile basis of Accounting’

5. Accrued Asset:

A developing but not yet enforceable claim against another person, which accommodates
with the passage of time or the rendering of service or otherwise. It may arise from the
rendering of services (including the use of money) which, at the date of accounting, have
been partly performed, and are not yet billable.

6. Accrued Expense:

An ‘expense’ which has been incurred in an accounting period, but for which no
enforceable claim has become due in that period against the organisation (Municipality).
It may arise from the purchase of services (including the use of money) which, at the date
of accounting, have been only partly performed and are not yet billable.

7. Accrued Liability:

A developing but not yet enforceable claim by another person, which accumulates with
the passage of time or the receipt of service or otherwise. It may arise from the purchase
of services (including the use of money), which, at the date of accounting, have been
partly performed and are yet not billable.

8. Accrued Revenue:

‘Revenue’ which has been earned in an accounting period, but in respect of which, no
enforceable claim has become due in that period, by the organization (Municipality). It
may arise from the rendering of services (including the use of money) which, at the date
of accounting, have been partly performed and are not yet billable.
9. Accumulated Depreciation:

The total to date of the periodic ‘depreciation’ charges, on ‘depreciable assets’.

10. Advance:

Payment made, on account of, but before completion of, a contract, or before acquisition
of goods or receipt of services.

11. Amortisation:

The gradual and systematic writing off, of an asset or an account, over an appropriate
period. The amount on which ‘amortisation’ is provided is referred to as ‘amortisable
amount’. ‘Depreciation’ accounting is a form of amortisation applied to ‘Depreciable
Assets’. Depletion accounting is another form of amortisation applied to ‘Wstign Assets’.
Amortisation also refers to gradual extinction or ‘provision’ for extinction of a debt by
gradual redemption or sinking fund payments or the gradual writing off, to revenue of
miscellaneous expenditure carried forward. E.g. share issue expenses, preliminary
expenses etc

12. Amoritsed Value:

The ‘amortisable amount’ less any portion already provided by way of ‘Amortisation’.

13. Annual Report:

The information provided annually by the Commissioner of the Municipality to the

Municipal Council and the Government concerning its operations and financial position
It includes the information statutorily required i.e. the Income and Expenditure Account
and the Balance sheet, and notes on accounts, Auditors report thereon, and observations
of the council (resolution of the council approving the report)

14. Assets:

Tangible objects or intangible rights owned by the Municipality and carrying probably
future benefits.

15. Auditors report:

The formal expression of opinion by an independent external auditor on the financial

statements of the Municipality including such reservations, qualifications and negations
as may be called for and incorporating, where appropriate, such statutory affirmations as
may be prescribed.
16. Bad Debts:

Debts owed to the Municipality which are considered to be irrecoverable. (Here it refers
to the arrears of Taxes, Fees and other revenue left uncollected beyond the prescribed
period)

17. Balance Sheet:

A statement of the financial position of the Municipality as at a given date, which

exhibits its assets, liabilities, capital, reserves and other account balances at their
respective ‘book values’.

18. Book – Value:

The amount at which an item appears in the books of account or financial statements. It
does not refers to any particular basis on which the amount is determined. E.g. cost,
replacement value, etc.

19. Capital Assets

Assets, including investments not held for sale, conversation or consumption in the
ordinary course of administration.

20. Capital Work in Progress;

Expenditure on Capital Assets which are in the process of construction or completion.

21. Changes in Financial Position, Statement of:

A financial statement which summarises, for the period covered by it, the changes in the
financial position including the sources from which funds were obtained, by the
Municipality and specific uses to which such funds were applied. This is also called
‘Funds Flow Statement’.

22. Contingent Asset:

As asset, the existence, ownership or value of which may be known or determined only
on the occurrence or non-occurrence of one or more uncertain future events.

23. Contingent Liability:

An obligation relating to an existing condition or situation which may arise in future,

depending on the occurrence or non-occurrence of one or more uncertain future events.
24. Cost:

The amount of expenditure incurred on or attributable to a specified article, product or

activity.

25. Cost of Purchase:

The purchase price including duties and taxes, freight inwards and other expenditure
directly attributable to acquisition, less trade discounts, rebates, duly drawbacks and
subsidies in respect of such purchase.

26. Current Assets:

Cash and other assets that are expected to be converted into cash or consumed in the
production of goods or rendering of servicing in the normal course of administration.

27. Current Liability:

‘Liability’ including loans, deposits and bank overdrafts which falls due for payment in a
relatively short period, normally not more than twelve months.

28. Debenture:

A formal document constituting acknowledgement of a debt by the Municipality usually

given under the common seal of the Municipal Council and normally containing
provisions regarding payment of interest, repayment of principal and security if any
(generally guaranteed by the Government). It is transferable in the appropriate manner.

29. Deferral

Postponement of recognition of a revenue or expense after its related receipt or payment

(or incurrence of a liability) to a subsequent period to which it applies. Common
examples of deferrals include pre-paid insurance and taxes, unearned subscriptions
received in advance by newspapers and magazine selling companies etc.(Unearned
property tax received in advance by the Municipality i.e. Property Tax received in
advance of the year to which it relates)

30. Deferred expenditure:

Expenditure for which payment has been made or a liability incurred but which is carried
forward on the presumption that it will be of benefit over a subsequent period or periods.
This is also referred to as ‘deferred revenue expenditure’
31. Deferred Revenue:

Revenue or Income received or recorded before it is earned and carried forward to a

subsequent period or periods to which it relates.

32. Deficiency:

The excess of liability over assts of the Municipality at a given date. This will also imply
‘deficit.

33. Depreciable Amount:

The historical cost or other amount substituted for historical cost of a depreciable asset in
the financial statements, less the estimated residual value.

34. Depreciable Asset;

Asset which is expected to be used during more than one accounting period, has a limited
useful life and is held by the Municipality for use in the production or supply or goods,
and services, for rental to others, or for administrative purposes and not for the purpose of
sale in the ordinary course of administration.

35. Depreciation:

A measuring of the wearing out, consumption or other loss of value of a depreciable asset
arising from use, effluxion of time or obsolescence through technology and market
changes. It is allocated so as to charge a fair proportion in each accounting period during
the ‘useful life’ of the asset. It includes ‘amortisaton of assets’ whose ‘useful life’ is pre-
determined and depletion of wasting assets.

36. Depreciation Method:

Any method of calculating ‘depreciation’ for an accounting period.

37. Depreciation Rate:

A percentage applied to the historical cost or the substituted amount of a depreciable

asset (or in case of a diminishing balance method, the historical cost or the substituted
amount less accumulated depreciation.)

38. Diminishing balance method:

A method under which the periodic charge for depreciation of an asset is computed by
applying a fixed percentage to its historical cost or substituted amount less accumulated
depreciation (net book value). This is also referred to as ‘written down value method’
39. Expenditure:

Incurring a liability, disbursement of cash or transfer of property of the purpose of

obtaining assets, goods or services.

40. Expenses:

A cost relating to:

(1) ‘the operations of an accounting period : or
(2) the revenue earned during the period: or
(3) the benefits of which do not extend beyond that period

41. Fictitious Asset:

Item grouped under Asst in a balance sheet which has no real value.

42. Fixed Asset:

Asset held for the purpose of providing or producing goods or services and that is not
held for re-sale in the normal course of administration.

43. Fixed Deposit;

Deposit for a specified period and at specified rate of interest

44. Functional classification:

A system of classification of expenses and revenues and the corresponding assets and
liabilities to each function or activity, rather than by reference to their nature.

45. Fundamental Accounting Assumptions:

Basic accounting assumptions which underline the preparation and presentation of

financial statements. They are going concern, consistency and accrual. Usually, they are
not specifically stated because their acceptance and use are assume. Disclosure is
necessary if they are not followed.

46. Fund:

The term ‘Fund’ refers to the amount set aside for a general or specific purpose, whether
represented by specifically earmarked assets or not.

47. Funds Flow Statement:

This is a statement of changes in the financial position whose definition is given in sl. no.
21 above
48. Income;

The Income of the Municipality denotes ‘Revenue’ due to it. The revenue is the ‘gross’
inflow of cash, receivables (which included recoverables like taxes, fees, lease amounts
etc) or other consideration arising in the course of the ordinary activities of the
administration of the Municipality from the sale of goods, from the rendering of services
and from the use by others, of the organisations’ resources yielding interest, rents from
shopping complex, levy of fees for conduct of Trades etc. Revenue is measured by the
charges of the services rendered to the public and by the charges and rewards arising
from the use of resources by them. It excludes amount collected on behalf of third parties
such as certain taxes like ST / IT etc. (here in Municipalities, Library cess collected)

49. Income and Expenditure Statement:

A financial statement, often prepared by non-profit making enterprises like clubs,

associations etc to present their revenue and expenses for an accounting period and to
show the excess of revenue over expenses ‘(or) vice versa for that period. It is similar to
profit and loss statement and is also called ‘ revenue and expense statement’

50. Intangible Asset;

Asset which does not have a physical identity eg. Goodwill, patents, copy-right etc.

51. Investment:

Expenditure on Assets held, to earn interest, profit or other benefits.

52. Invesements:

Assets held not for operational purposes or for rendering services i.e. assets other than
fixed assets or current assets (e.g. securities, shares, debentures, immovable properties)

53. Liability:

The financial obligation of the Municipality other than own funds.

54. Mortgage:

A transfer of interest in specific immovable property for the purpose of securing a loan
advanced, or to be advanced, an existing or future debt or the performance of an
engagement which may give rise to a pecuniary liability. The security is redeemed when
the loan is repaid or the debt discharged or the obligations performed.

55. Net Assets:

The excess of the book value of assets (other than fictitious assets) of the Municipality
over its liabilities. This is also referred to as NET WORTH or shareholders’ fund.

56. Net Fixed Assets:

Fixed assets less accumulated depreciation thereon up-go-date.

57. Pre-paid expense;

Payment for expense in an accounting period, the benefit for which will accrue in a
subsequent accounting period(s).

58. Provision:

An amount written off or retained by way of providing for depreciation or diminution in

value of Assets or retained by way of providing for any known liability, the amount of
which cannot be determined with substantial accuracy.

59. Provision for doubtful revnues:

A provision made for revenue considered doubtful of recovery.

60. Revenue:

See Income (sl no. 45) which is reproduced below, again

The income of the Municipality denotes ‘Revenue’ due to it. The revenue is the ‘gross’
inflow of cash, receivables (which includes recoverables like taxes, fees, lease amounts
etc) or other consideration arising in the course of the ordinary activities of the
administration of the Municipality from the sale of goods, from the rendering of services
and from the use by others, of the organisations’ resources yielding interest, rents from
shopping complex, levy of fees for conduct of Trades etc. Revenue is measured by the
charges for the services rendered to the public and by the charges and rewards arising frm
the use of resources by them. It excludes amount collected on behalf of third parties such
as certain taxes ST / IT etc, (here in Municipalities, Library cess collected0

61. Sinking Fund:

A fund created for the repayment of a liability or for the replacement of an Asset.

62. Straight Line Method:

The method under which the periodic charge for depreciation is computed by dividing the
depreciable amount of a depreciable asset by the estimated number of years of its useful
life.
63. Sundry Creditor:

Amount owed by the Municipality on account of goods purchased or services received or

in respect of contractual obligations. Also termed as trade creditor or account payable.

64. Sundry Debtor:

Person from whom amounts are due for goods sold or services rendered or in respect of
contractual obligations. Also termed as debtor, trade debtor, account receivable.

10. OTHER TERMS (USAGES) AND REGISTERS:

The following are the other terms used in this manual and the registers prescribed for use
in the accrual system of accounting.

(1) Accounts Cell:

The term ‘Accounts Cell’ shall mean the department or section in charge of,

(i) Receipts Accounting

(ii) Payments Accounting
(iii) General Ledger maintenance
(iv) Projects Ledger maintenance
(v) Compilation of Accounts i.e. preparation of monthly Trial Balances and the
annual Income and Expenditure Account and the Balance Sheet

(2) Chart of Accounts:

Volume I of this Manual deals with accounting procedures. Volume II is for detailing
Account Code nos. for different kinds of transactions with descriptions. This system of
codification of accounts would provide for a subjective ad objective analysis of income
and expenditure and of balance transactions.

(3) Forms and Registers:

Another volume i.e. Volume III is given separately for New Forms, Registers and
Formats for the Accounts. This Volume also includes 24 Schedules for gathering data for
preparation of opening Balance Sheet.

(4) Revenue Fund:

In this fund account, all revenue receipts and revenue (ordinary) expenditure for
administration / maintenance of assets and facilities created to render various services
enshrined in the Acts should be accounted for.
(5) Capital Fund:

This fund is meant for accounting capital receipts and capital expenditure which includes
mainly project expenditure. Loans and grants received from the Government and other
Financial Institutions for specific purposes (for creation of Assets / Facilities) are
accounted here. When the Council decides to execute a project from out of Revenue Fund
(Internal Resource), the amount for this project will be received from the Revenue Fund,
by transfer, to this fund.

(6) Water Supply and Drainage Fund:

This fund account has to be maintained separately. The code nos. of Revenue and Capital
Funds that are common in nature and that can be made applicable to this fund have to be
used with the prefix assigned to this fund.

(7) Elementary Education Fund:

There are limited items of income and expenditure in this fund. These items are
accounted with relevant prefix.

(8) Identification of Funds:

The fundwise prefix to be used are given below:

RF - Revenue Fund
CF - Capital Fund
WS - Water Supply & Drainage and Sewage Farm
EE - Elementary Education Fund

(9) Receipts Book: (MCF 4) (Revenue Fund)

(a) In this Book, daily collections by Cash for various items of income and their
remittances are entered, based on Bank Receipt Vouchers prepared and sent by
the Shroff / Junior Assistant in the Treasury, duly checked and approved by the
Manager / Administrative Officer to the Accounts Cell. This Book is prepared for
the Revenue Fund.

(b) The cheques / DD’s received through the Register of Cheques received, are also
to be accounted in the Receipts Book. (Fund Wise), through a BRV daily.

(c) Adjustment of Receipts in the Treasurey and Credits given by the Bank should be
ascertained and these items brought to this Receipts Book by preparing BRV.
(10) Bank Receipt Voucher (BRV) (MCF 3):

To facilitate preparation of accounts by computer, documents are created as inputs. The

document for receipt coming through the form of cash / cheque / DD, adjustment in the
Treasury / Bank is called ‘Bank Receipt Voucher’. This should be serially numbered on
annual basis. To be clear, no receipt can be accounted for, in the Receipts Book without
preparing the BRV therefore. In the cases of credits given in the Bank Scroll or Treasury
Passbook, the details should be obtained and BRV’s prepared and entered in the Receipts
book.

(11) Payments Book (MCF 6) : (Revenue Fund)

All claims are made in the form of Bills (Pay Bills, Contract Bills, other claims etc.,) with
supporting documents. They are scrutinized and passed for payment before cheques are
issued. In this system, in addition to the above bills, a document called ‘Bank Payment
Voucher’ should be prepared. These Payment Vouchers should be entered in this book.
The totals in this book indicate the total payments, made through cheques – monthly.
This book will be prepared for the Revenue Fund, Capital Fund, Water Supply &
Drainage Fund and Education Fund separately.

(12) Bank Payment Voucher: (BPV) (MCF 5)

a) As explained above, for every payment made by cheque, a document is created

and this is called ‘Bank Payment voucher ‘. Adequate columns have been
provided in this voucher to identify the department which incurs expenditure and
the ‘account head’ to which the expenditure is debited. Hence the BPV should be
prepared by the concerned department / section from which the payment is sought
for. The Sl. No. is assigned in the Accounts Cell on annual basis, while passing
the claims for payment. The BPV indicates the abstract of expenditure with
account description No cheque shall be drawn without a BPV and an entry
therefore, in the Payments Book.

b) The monthly receipts and payments arrived at, respectively in the Receipts Book
and Payments Book are compared with the entries in the Bank Scrolls received
from the respective Banks and a plus and minus memo, called Bank
Reconciliation Statement is prepared to settle the differences between these two
balances.

(13) RECEIPTS & PAYMENT BOOK

The Transaction in the WS&D and Elementary Education Fund are considerably less.
Therefore, it is sufficient to have a combined book viz, Receipts & Payments Book to
record all receipts and payments including payment on Capital Works.
(14) In the double entry system of accounting, since each transaction has got two fold
effect, it should be journalised by preparing a Journal Voucher. The Journal Vouchers
would be of five kinds as detailed below, for the purposes of easy identification and
correct classification of expenditure / income.

(i) General Journal Voucher (GJV) (MCF 7):

This journal voucher in the prescribed form is used for journalizing all kinds of
income and other adjustments, affecting the income.

(ii) Expenses Journal Voucher (EJV) (MCF 18):

This journal voucher in the prescribed form is used for the transactions relating to all
expenses, such as salary bills, T.A. bills, all other advances supplemental salary bills
and bills for other services.

(iii) Purchase Journal Voucher (PJV) (MCF 19);

This journal voucher in the prescribed form is used for purchase of all materials.

(iv) Contractors Journal Voucher (CJV) (MF 20):

This journal voucher in the prescribed form is used for the payments through contract
bills and other claims by the contractors.

(v) Fixed Assets Journal Voucher (FAJV) (MCF 23):

This journal voucher in the prescribed form is prepared for assetising the Capital
Works (Projects) completed or bought out assets.

(15) General Ledger (MCF 34):

This will be prepared through computer, based on BRVs, BPVs and Journal
Vouchers, by allotting separate folios for individual account heads. At the end of each
month, the balances will be struck both under debit and credit sides and the net
balance (debit or credit) in each account should be arrived at. Simultaneously, the
monthly progressive (cumulative) balances should be computed for purpose of
preparing monthly Trial Balances. This means that the balances under various
‘account heads’ should be extracted (struck) at the end of every month.

(16) Collection Bank:

The council can nominate one or more Banks for collecting Property Tax. Daily
collections in the Treasury are to be remitted into this Bank. This is called the
Collection Bank. Any amount required for payment will be transferred to the payment
Bank. No payments should be entertained in this account.
(17) Link Bank:

The term ‘Link Bank’ indicates the Lead bank or Main Bank to which the remittances
in the Collection Banks are transferred periodically with the Daily Collection
Statements (MCF 9), under ‘standing instructions’ with a coy of this statement to the
Accounts Cell along with the receipted remittance chalans.

(18) Payment Bank:

This indicates the Bank in which sorts of payments are made. Funds required for
payments will be transferred from the Collection Bank (LINK BANK) through
cheques.

(19) Bank Transfer Book (MCF 8):

This is meant for noting down ‘transfer of funds’ from one Bank to another, by
cheque as the case may be.

(20) Inter Fund Transfer Slips (MCF 7):

In the administrative expediency, it becomes necessary to transfer amount from one

fund account to another, in order to meet out certain inevitable payments as a tactful
and prudent financial management. Such transfer of amount is to be make by
preparing the Fund Transfer Slip and by making entry in the Bank Transfer Book
(MCF 8) and by drawing cheque for the amount, in the fund from which the amount
is drawn. Such Transfer is shown against Code no. 3100 – Inter Fund Transfers – in
the Trial Balance.

(21) Inventory Material Receipts Note (IMRN) (MCF 27):

This should be prepared in duplicate in the prescribed form as soon as materials on

purchase order are received and accounted for in the Priced Stores Ledger and this
should be signed by the Store – Keeper and the Officer In-chare of purchase and
stores and one copy enclosed with the bill for being forwarded to the Accounts Cell
for payment.

(22) Inventory Materials Indent and Issue Note (MCF 28):

This should be prepared in Triplicate in the prescribed from signed by the Indenting
officer, Store – keeper and the Officer who is having control over the stores. The first
copy will be given to the Indenting Officer in support of the issues made from the
stores. The second copy will be sent to the Accounts Cell, through the Engineering
Branch along with the EJV . CJV duly signed by the Engineer, debiting maintenance
head of account / materials cost recoverable account – contractors (3053) and
crediting the specific stock account (3001). The third copy will be retained in the
stores.
(23) Stores Return Note (SRN) (MCF 30) :

The Officer who received materials from stores will utilize them in work. If, in due
course of time, he finds that some of the materials received are not required for the
work, he will arrange to return them in good condition to the stores by preparing the
Stores Return Note (SRN) in triplicate in the prescribed form. Such material shall be
entered in the Priced Stores Ledger (MCF 26) on the receipt side and out of two
copies of such stores return note, one copy must be sent to the Accounts Cell through
the Engineering Branch with EJV duly signed by the Engineer incharge, debiting the
specific stock accounting and crediting the maintenance account / materials cost
recoverable account – contractors (3053) as the case may be.

(24) Priced Stores Ledger (MCF 26):

This will be maintained ‘in the stores’ in the prescribed form for receipt, issue and
balance of various kinds of stores by allocating various folios. Two ledgers should be
maintained, one for Inventory items and another for Non-Inventory items.

The book balance of quantity aspect should be physically verified by an appropriate

authority authorized for this purpose and certified to subject to taking action for
regularization of shortages, if any, and bringing excess, if any, into the Priced Stores
Ledger.

(25) Projects Ledger (MCF 32):

The Projects Ledger will be maintained in the Engineering Branch, fund wise. The
instructions for maintenance of this ledger are detailed in para 5 of chapter 9 of this
manual.

(26) Devolution Fund:

(a) Based on the 74th amendment to the Constitution of India, the Govt. ordered to
transfer funds, from the State Revenue, every year to the Local Bodies at the
specified rates and to keep this amount separately so as to spend them on the
authorized items listed out by the Government from time to time as mentioned
below. So, a separate Bank Account should be maintained for the amounts
received on quarterly basis (code n. 3064). These amounts should be accounted
under Revenue Fund – Income in code No. 1053.

(b) Similarly the authorized items of expenditure should be booked to the respective
Account Heads with prefix ‘DV’ in addition to the departmental prefix like RE,
AC etc.
Authorised items of expenditure:

i) Payment of power charges for Street Lights and Water Supply

Maintenance.
ii) Payment of maintenance charges for Water Supply Schemes by
Tamilnadu Water Supply and Drainage Board and for incurring the
expenditure towards water supply maintenance by municipalities
including materials such as Bleaching powder, Alum, etc., required for
the purpose.
iii) Maintenance of Roads
iv) Maintenance of Street Lights
v) Maintenance of conversancy and other Public Health Services
including materials such as Lime, Phenyl, Bleaching Powder and other
Public Health Materials.
vi) Maintenance of Underground Drainage or Open drainage.
vii) Maintenance of other facilities like compost yard, Sewage Farm,
Slaughter House, Maternity centers, Dispensaries, Community centers,
Public Toilets etc.
viii) Payment of Pension and other retirement benefits to retired employees
for whom payments are made from the Local Bodies Fund.
ix) Payment of salary of staff including sanitary workers.
x) Payment of interest on loans obtained from Govt. for Municipal
purposes.

(c) In respect of Water Supply and Drainage Fund Account, in order to spend on the
authorized items specified by the Govt. the amount required therefore, should be
transferred from Revenue Fund by means of a cheque. The procedure indicated in
para (b) above, should be followed here, with suitable modifications thereof, for
incurring expenditure using the code nos. with relevant prefix.

(27) Manual Workers General Welfare Fund:

(i) Every Municipality has to remit a contribution at the prescribed rate (at
present 0.3% of the total estimated cost of each civil work) to the Manual
Worker’s General Welfare Fund maintained by the Tamilnadu Labour
Welfare Board, by collecting the amount from the civil engineering
contractors in the form of DD at the time of issuing work orders, after
finalizing the tenders.

Such contribution is payable by means of DD in the case of departmental execution of

civil works also from the Municipal Fund.

(ii) In the case of issue of Building Licences, the above contribution should be
calculated on the total value of the estimate of the work to be executed and the
amount arranged to be remitted by means of DD payable to the above Fund,
 as is being done in respect of development charges due to CMDA/LPA after
making necessary entries in the Register of Building Licences.

(iii) The Town Planning Branch and the Engineering Branch of the Municipality
shall maintain separately a Register to record all such DDs and forward them
on fortnightly or monthly basis, with a covering letter to the Administrator of
this Welfare Fund, (this is maintained under the control of the Commissioner
of Labour of the Government of Tamilnadu) with a request to acknowledge
their receipt.

(iv) It is made clear that the Contribution made to this welfare fund, should not
pass through the accounts of the Municipality.

(28) Job Chart or Officer Order:

(a) A job chart should be prepared by the Municipal Commissioner, fixing

responsibility on the subordinates in the Municipal Office, to prepare
correctly the vouchers and journal vouchers to ensure the effective
implementation of this Accounting System. This will ensure the
involvement and accountability of the staff members working in the
Municipality.
(b) This job chart may also be in the form of an office order issued by the
Municipal Commissioner fixing responsibility specifically on the
subordinates.

11. ACCOUNTING OF MONEYS RECEIVED AND PAID:

(a) It is the primary function that all moneys received and moneys paid are to be
accounted for, first, Hitherto, a basic record called ‘CASH BOOK’ was
maintained, wherein daily receipts and payments were recorded chronologically
for a month. The Cash Book was closed at the end of the month and a statement
of reconciliation called ‘Bank Reconciliation Statement’ was prepared to
ascertain the various items of differences between the balance as per the cash
book and the balance as per eh Bank Pass Book, for subsequent settlement.
(b) In this accounting system, the accounts are to be compiled by the Compilation
section of the Accounts cell. There is no need to maintain a cash book manually.
In the place of the cash book, two separate documents will be created. One is
called ‘Receipts book’ and another, ‘Payments Book’. Therefore, Bank Receipt
Vouchers (B.R.V.) are to be prepared and used for preparing the Receipts Book.
Similarly Bank Payment Vouchers (B.P.V) are to be prepared and used for
preparing the Payments Book.

12. PREPARATION OF BANK RECEIPT VOUCHERS (B.R.V):

(1) (i) (a) At present, collections of property Tax are made through Revenue
Assistants by issuing receipts on the spot by carbon process. These
 collections are remitted into the Municipal Treasury daily through Chalan
Registers.

(b) The property tax, profession tax and water charges are remitted
directly by the tax payers, in person, in the municipal office, in cash. The
are received by the shroff, by issuing receipts to them (as is being done by
the Revenue Assistants on the spot). Such collections are recorded in the
chalan register of the respective Revenue Assistants or the Junior
Assistants (according to convenience and office order issued for this
purpose) and total amount collected, accounted in the names of the
Revenue Assistants or by the designation of the Junior Assistants.

(c) In the Treasury, besides receiving the above two collections, all other
receipts are also received through triplicate chalans. They are all recorded
in the CHITTA and the total of daily collections is arrived at. These
collections are remitted into the Bank on the next working day.

(ii) The cheques received for Property Tax etc are entered in the Register
of cheques received. Separate Bank remittance chalans are prepared for
each of these cheques and they are deposited at the Bank, for collection
and credit.

(iii) Similarly, the amounts received through money orders are handed
over to the Treasury after making necessary entries in the Register of
money orders. Such cash items are accounted for in the Treasury by
triplicate chalans by specific indication as M.O in red ink and also in the
CHITTA.

(iv) In some Municipalities, property Tax only is accepted at the

designated Bank Branches, from the Tax payers by presenting pre-
prepared chalans that were already served on them by the Revenue
Assistants or by chalans kept available at the Bank Branches themselves.
These Collections are periodically transferred by the Collection Branches
to the respective LINK BANK, where the Municipality is maintaining the
Collection Account. In such cases, the Collection Branches send a DAILY
COLLECTION STATEMENT to the LINK BANK with supporting
receipted chalans. After making necessary entries for the amount specified
in this statement, in the Bank Account maintained in the LINK BANK,
this statement with the chalans is forwarded to the Municipal office.

The above methods of Collection shall also continue in this system of

accounting.

(2) The prescribed chalans (MCF 1 & MCF 2) should be used for property
tax collections and collections of all other items of income with
appropriate prefix and details.
 (3) Bank Receipt Vouchers are to be prepared for,

(i) Each day’s remittance into the bank

(ii) Each cheque or a bunch of cheque that wre presented to the Bank
through the Register of cheques received
(iii) Each daily statement of the collection bank accompanied by a bunch
of Bank remittance chalans, and
(iv) Each adjustment bill presented at the Government Treasury for credit
to the Municipality in respect of Duty on Transfer of Property,
Entertainment Tax, Magisterial Fines, Toil compensation etc., and all
other receipts credited by Other departments.

(4) These Bank receipt vouchers should be serially printed and used for
preparing RECEIPTS BOOK in the Compilation Section of the Accounts
Cell.

(5) At the end of each month, or on weekly basis on receipt of Bank Scroll
and the Treasury Pass book / Scroll the credits for all entries as per the
Receipts book should be ensured with the Bank Scroll and the Treasury
Pass book / Scroll. In this process the details of dishonoured cheques, if
any, are known. Such cheques should be sent to the Shroff or the Cashier
to make entries in the Register of Dishonoured Cheques (MCF 12) and
received back in the Accounts Cell for being retained there. The Accounts
Cell shall inform the respective departments, of the dishonoured cheques,
with a request to take further action, for collection of the amounts covered
by those cheques in CASH with the penalty amount.

13. PREPARATION OF BANK PAYMENT VOUCHERS (BPV):

1.Any claim for payment is to be accompanied by a bill in the prescribed

form like paybill, contract bill, refund voucher etc.

2. The above bills for payment should be accompanied by the relevant

Journal Vouchers and the Bank Payment Vouchers which should be
serially numbered on annual basis in the Accounts Cell while passing the
claims for payment and recording the vouchers in Payments Book. The
PAYMENTS BOOK will be prepared with reference to BPVs and then
only the cheques have to be drawn by the Accounts Cell. At the end of the
month, uncashed cheques, if any, are ascertained and appropriate action
taken. Wrong debits if any, given by the Bank are brought to its notice for
clearing them. It is necessary that an agreement be made with the bank, to
send the Bank Scroll on weekly basis, with details for debits and credits.

3. (a) The claims that arise are to be treated as LIABILITIES. So the

liabilities are first to be ensured and created and then they are to be
 cleared. In order to watch the clearing of liability, the transactions are
journalized.

(b) Journal vouchers are to be prepared in the prescribed form and

accounted for, in their general ledger for preparing the Trial Balance.

(c) The compilation section has to make postings daily in the

GENERAL LEDGER with reference to the BRVs and BPVs.

14, CODIFICATION OF ACCOUNTS

(1) The account code nos. are given for various items of Income and Expenditure and
Assets and Liabilities for all Funds viz., Revenue Fund, Capital Fund, Water
Supply and Drainage Fund and Elementary Education Fund. With relevant prefix
they are identified by numerical codes with 4 digits as detailed in Volume II of
the manual.

(2) The Departments are identified by ALPA CODES as detailed below.

S.No. Names of Departments Alpha Code to be Used

01 REVENUE RE
02 ACCOUNTS CELL AC
03 GENERAL GD
04 COUNCIL CL
05 ENGINEERING EN
06 WORKSHOP EW
07 PARKS AND GARDENS PG
08 STREET LIGHTS SL
09 STORES ST
10 TOWN PLANNING TP
11 PUBLIC HEALTH PH
12 CONSERVANCY CN
13 SOLID WASTE MANAGEMENT SW
14 HOSPITALS & DISPANSARIES HD
15 MATERNITY & CHILD MC
WELFARE CENTRES
16 ANTI-MALARIA SCHEME AM
17 ANTI-FILARIA SCHEME AF
18 I.P.P.V/ FAMILY WELFARE FW
SCHEME
19 ANIMAL HUSBANDARY AH
20 TAXATION & APPEALS TC
COMMITTEE
21 EDUCATION ED
 22 ELEMENTARY EDUCATION EE
23 ZONAL OFFICE I ZA
24 ZONAL OFFICE II ZB
25 ZONAL OFFICE III ZC
26 ZONAL OFFICE IV ZD
27 ZONAL OFFICE IV ZE
28 ZONAL OFFICE IV ZF AND SO ON
29 WATER SUPPLY & DRAINAGE WS
30 SEWAGE FARM SF

(3) The transactions – both income and expenditure – are journalized. In other words,
in respect of income, the demands are to be ensured by way of ‘Recoverables’ in
order to collect the amounts in time. In the course of the year, any fresh demand
that is being raised, will have to be treated as ‘Accrual’ and brought under
‘RECOVERABLES’

(4) In the cases of items of revenue where the collection itself is treated as demand,
there will be no accrual of income. As regards expenditure, liabilities are to be
created first and they are to be cleared promptly.

(5) (a) So for journalizing the transactions, JOURNAL VOUCHERS (JVS) are to be
prepared. Further, with a view to identify the class of journal vouchers, they are to
be printed in different colours and called as follows:

GENERAL JOURNAL VOUCHER G.J.V.

EXPENSES JOURNAL VOUCHER E.J.V.
PURCHASE JOURNAL VOUCHER P.J.V.
CONTRACTOR JOURNAL VOUCHER C.J.V.
FIXED ASSETS JOURNAL VOUCHER F.A.J.V.

In almost all cases of payments, there will be a bill (claim), a journal voucher depending
on the nature of transaction and a BPV besides supporting documents.

(b) A register called ‘Register for Journal Vouchers’ (MCF 25) for giving serial
nos. to each kind of journal vouchers for a financial year by allotting separate folios
therefor shall be maintained in the Accounts Cell.

15, COLLECTION OF ACCOUNTING – MAIN OFFICE

The Collections made in the Treasury will be entered in the CHITTA (MCF 14). The
Shroff will close the CHITTA and prepare an abstract for being sent to the Accounts Cell
for compilation of daily receipts, with Bank Receipt Vouchers (B.R.V) duly signed by the
Manager.
16. COLLECTION ACCOUNTING AT ZONAL OFFICES:

If it is decided to have Zonal offices for all administrative purposes, a collections center
should also function at such zonal offices. All Collections of taxes and fees should be
made here as is done in the Municipal Treasury and the Accounting System will be the
same as indicated above. The collections should be remitted in the nearest authorized
Bank Branch after making necessary arrangements with that Branch. The Shroff shall
prepare the BRV in the Zonal Office. It will be checked by the Superintendent and put up
to the Administrative Officer for approval. On the next working day, the Administrative
Officer or in his absence, the Superintendent / Accountant in the office should make
arrangements for remittance of the money into the bank. The Receipt book (MCF 4) shall
be maintained by the Accountant and his Assistant in the zonal office.

17. CODE NUMBERS FOR BANKS:

1) In this system all banks (Revenue Fund - Collection - LINK Banks and Payment
Banks, Devolution Fund, Capital Fund - Receipt Bank and Payment bank, Water
supply and drainage fund and EE Fund) are provided with code numbers to enable
the Accounts Cell and other departments to identify the banks. The Sub-Treasury
/ Treasury which is also to be treated as a Bank is provided a Code Number
(3065) in view of the fact that assigned revenues / Govt. loans are adjusted and
repayments of loans made there. If the Govt. order that there should be more than
one P.D. Account in the Treasury, such Accounts may, after opening, be given
separate code numbers. However, the T. Deposit account in the Treasury need not
be given in a code no. as it is of a trusted nature and does not form a part of the
revenue fund or the Capital Fund.

2) The branches of the collection bank are not given code nos. Only the LINK Banks
for them are given code nos.

For eg. The Property Tax is collected through 11 branches of S.B.I. in a

Corporation area and LINK Bank of the S.B.I. receives all these collections and
gives credit in the Collection Account maintained by it. So, this LINK Bank only
is given a code no.

CHAPTER – 02

TAXES & FEES ACCOUNTING

a) PROPERTY TAX ACCOUNTING:

1) GENERAL

Property Tax is the main source of income of all Urban Local Bodies. The
important aspects that should be taken care of, are detailed below:
i) Annual value of the properties should be rounded off to the next
nearest 10 Rupees.
ii) Property tax should be rounded off to the next nearest Rupee.
iii) Penalty as fixed by the council should be charged for each dishnoured
cheque and collected.
iv) Uniform levy of 5% towards Education Tax is to be charged on the
Property Tax value.
v) All adjustments, enhancements, reductions, vacancy remissions etc
should be intimated to the Accounts Cell through serially numbered
‘Property Tax Adjustment Slips (MCF 11)’ kept in a book form with
pre-printed serial numbers in order to create ‘Recoverable’ – Assets in
the cases of all enhancements and to reduce the ‘Recoverables in other
cases’. By this, the maintenance of mutation register is dispensed with.

2) ASSESSMENTS

a) Assessed on the buildings and vacant lands within the Municipal

Limits with reference to the prescribed formula on half-yearly
basis. i.e. the taxes demanded and collected for each half hear. So,
the demand for each half year has to be raised TWICE in a
financial year. i.e. in the months of April & October (GJBS) this
demand, is naturally, based on the demand already finalized for the
previous half year. The Property Tax consists of:

i) Property Tax for General Purposes

ii) Water supply and drainage tax
iii) Education tax

Besides an additional levy of library Cess for and on behalf of the local
library authority. To account for demands raised at the beginning of every
half year, the following accounting entries have to be passed through three
GJVS.

1. 3002 Property Tax Recoverable A/c – Current Dr

1001 To Property Tax For General A/c Cr

2. 3013 Water Supply & Drainage Tax Receivable A/c Dr

-Current
1002 Water Supply & Drainage Tax A/c Cr

3. 3016 Education Tax Receivable A/c – Current Dr

1003 Education Tax Cr

a. Under this accounting system, the following documents are to be

used.
 1. Demand Register.
2. Monthly Assessment Register (monthly list in book form).
3. Properly tax adjusted Slips.(MCF 11)
4. Intimation to the Assesses, for new Assessments (Special notice).
5. Pre-Prepared chalans in respect o remittance by the tax payers
themselves at the bank (MCF 1).
6. Demand collection and Balance statement (DCB).
7. Vacancy Remission statement.
8. Tax reduction on appeal – statement.
9. Change in tax amount on court direction – statement.
10. Statement of Assessments Written – Off.
11. General journal vouchers.

(C) New Assessments: Increase in Assessments.

i. The Revenue Assistants, during their spot verification, should

report every month, through the monthly lists of the houses / buildings,
the construction of which was completed or which were occupied.
These monthly lists are scrutinised by the Revenue Officer with the
assistance of the Revenue Inspector and the tax leviable on such
houses / buildings assessed. The Commissioner being the authorized
officer to levy the tax, approves the above the proposal and issues
orders through special notices. Whatever necessary, the Commissioner
himself inspects the house / building and then approves the assessment

ii. This exercise has to be done every month in respect of all

wards in the Municipal Limit, for which the monthly lists were
submitted by the Revenue Assistants. There Should not be any delay in
levy (finalizing assessments) and in bringing the New houses under
assessment

iii. The following schedule of time should be strictly followed :

1. Submission of monthly lists by 5th of next month

the Revenue Assistant for a month .

2. Inspection and proposal by the 15th

of next month
Revenue Officer

3. Formal orders through special notices 30th of next month

on the tax assessed to such new houses /
buildings.
 iv. As soon as the formal orders are passed and the special notices are, all
the new assessments should be accounted for, by a GJV as indicated
in sub para (a) above. In other words GJVs have to be prepared on the
30th itself for all new assessments in a month, got approved by the
Revenue Officer or Commissioner / Asst, Commissioner and
forwarded to the accounts cell for being recorded in the General
Ledger. So, every month there should be a GJV or a set of GJVs for
additions or enhancements or reductions.

v. The act empowers the Commissioner to levy property tax with

retrospective effect for a total period of six years, i.e. 12 half years. In
such cases of retrospective levy of property tax, the tax due is for
previous half years also. So, such amount cannot be treated as
(income) for the accounting year. However, the collection of such
property tax, so levied with retrospective effect, for previous half years
has to be watched, by raising the demand in the Arrear Demand
Register under the respective half year / year.

vi. Such amounts assessed through the monthly lists, for previous years in
a month should be totaled and three GJVs have to be prepared with the
following entries.

3003 Property Tax - Recoverable - Arrears Dr.

1088 To prior year income Cr.

3019 Water Supply & Drainage Tax Receivable Dr.

- Arrears
1088 To prior year income Cr.

3020 Education Tax Receivable - Arrears Dr.

1088 To prior Year Income Cr.

(To account for the Property Tax relating to previous years for which
demand is raised in the accounting year)

(3) CHANGES IN ASSESSMENT : REDUCTION IN TAX DUE:

(i) (a) There will be two occasions to reduce the assessment amount, either on
appeal reduction by the Taxation Appeal Committee (TAC) or on the court direction. The
changes, so ordered, have to be given effect in the existing Demand Register, by
preparing Property Tax adjustment slips (MCF 11) and GJVs there for.
 (b) This can be given effect in the current year (Accounting year) by preparing
GJVs only by using the relevant adjustments slips (MCF 11). The Journal Entry for such
deductions will be

1. 1001 Property Tax – General Purposes A/c Dr.

3002 To Property Tax Recoverable A/c Cr.

2. 1002 Water Supply & Drainage A/c Dr.

3013 Water Supply & Drainage A/c Cr.
Receivable - Current

3. 1003 Education Tax A/c Dr.

3016 To Education Tax Receivable A/c - Current Cr.

In cases where such reduction of tax has to be given retrospective effect, affecting the
previous half years’ ‘Demands’, the following journal entry is to be passed

1. 1088 Prior year Income A/c Dr.

3003 To Property Tax Recoverable A/c Cr.
- Arrears

2. 1088 Prior year Income A/c Dr.

3019 To Water Supply & Drainage A/c Cr.
Receivable – Arrears

3. 1088 Prior year Income A/c Dr.

3020 To Education Tax Receivable A/c Cr.
- Arrears

(To account for the tax relating to the previous half years reduced now, an appeal or court
direction in this accounting year)

(ii) Consolidating the demand statement, verification by the Accounts Cell and
validating both changed and unchanged particulars of assessments are to be done to
finalise the assessment procedure. The Revenue Officer should see that the consolidated
demand statement is finalized by the dates prescribed in para (2) (c) (iii). The
Commissioner / the P.A. to Commissioner or the Zonal Asst. Commissioner should
ensure the above finalisation in time.

(iii) Assessees are to be informed through Demand notice (special notices).

(iv) Simultaneously pre-prepared chalans in triplicate are to be furnished to the

Assessees, through the Revenue Assistants in the municipalities where the system of
assesses themselves remitting the tax in to the Bank in vogue.
 (v) There may be clear cases of excess collection of petty amounts which could
not be adjusted to the next half-year’s tax nor could it be worth refunding to the parties
concerned. The excess amount so collected, should be brought under Property Tax –
‘Excess Remittance A/c’ (Account Code No. 1005). By this procedure, the demand
register is updated.

(4) COLLECTION SYSTEM:

Property Tax Collections are to be made by the following methods:

1. Collection by the Revenue Assistants in Cash, as is hitherto done, by carbon process.

(in the existing form)

2. Collection is done in the treasury functioning in the Zonal Offices by cash through the
office collection register of the Chalan Register.

3. Collection by cash in the Treasury functioning at the Central Office.

4. Collection through cheques / D.Ds obtained by the Revenue Assistants / the Zonal
office / Treasury and routed through the Register of Cheques Received.

5. Collection i.e. remittance in cash / cheque / D.D.s by the Assesses themselves at the
bank branches with pre prepared chalans where arrangements with the Banks for
accepting Property Tax are made.

I Property tax - components

i. As already explained, the Property Tax Collected comprises of the following Taxes and
Cess

1. Property Tax – General Purposes

2. Water Supply & Drainage Tax
3. Education Tax
4. Library Cess

So, ‘the property tax – general purposes’ should be accounted for, in the Revenue Fund.
The Water Supply & Drainage Tax and Education Tax should necessarily be accounted
for, in the Water Supply & Drainage Fund and Education Fund respectively. The Library
Cess is to be temporarily accommodated in a ‘Liability Code’ in the Revenue Fund for
eventual payment to the LLA by cheque.

ii. Collection in cash and remittance by the Revenue Assistants through the
Property Tax chalan register in the Municipal Treasury

a) The property tax chalan register (MCF 13) is provided with necessary columns
for,
 Assessment No.
Period to which the tax relates, the
Amount,
‘Current’, ‘arrear’ and total
printed receipt No. issued to the parties, by the Revenue Assistant under carbon
process on this spot.

The Revenue Assistants should record the collections in the property tax chalan
register and arrive at the totals properly, before handing over the cash with this chalan
register to the Shroff in the Municipal Treasury. The collections through printed receipts
as recorded by the Revenue Assistants in the Challan Register shall be checked by the
Junior Assistants / Assistant concerned by carefully verifying the Carbon copies of the
receipts available in the Receipts Book.

The Shroff, on his part, should, while writing up the chitta and the relevant
income code Nos. total the collections properly and arrive at the grand total collections
for the day.

b) The above procedure is to be followed in respect of direct remittance ‘in cash’

in the Municipal Treasury by the tax payers and in the treasuries functioning in the Zonal
Offices of the Corporation.

c) The Property Tax so collected shall be accounted for, with the following entries
in the BRV for the day relating to the fund concerned.

I. Revenue Fund:

3060 Bank A/c Dr.

3002 To Property Tax Recoverable A/c - Current Cr.
3003 To Property Tax Recoverable A/c - Arrears Cr.

1005 To Property Tax Excess Collection A/c Cr.

(To accommodate clear cases of excess collections, if any)
4043 To Library Cess Payable A/c Cr.

II. Water Supply & Drainage Fund:

3139 Bank A/c Dr.

3013 Water Supply & Drainage Tax Receivable A/c - Current Cr.
3019 Water Supply & Drainage Tax Receivable A/c - Arrears Cr.

III. Education Fund:

3069 Bank A/c Dr.

 3016 Education Tax Receivable A/c - Current Cr.

3020 Education Tax Receivable A/c - Arrear Cr.

Note: (a) The three bank chalans (pay-in-slips) should be prepared by the shroff for
remittance of cash into the bank in three account Nos. for the above three funds.

(b) The very purpose of prescribing three separate remittances into the three fund
accounts, at the remittance stage itself, is that water supply and drainage tax should be
accounted in the water supply and drainage fund account only, daily. Similarly education
tax should be accounted in the education fund account only, daily.

1. In the first challan, the Property Tax and other Taxes and fees etc., relating to
the Revenue Fund as per the Chitta will be included.

2. In the Second challan, Water Supply & Drainage Tax as per the Chitta, will be
shown.

3. In the third challan the education tax as per the chitta will be remitted to the
Education Fund A/c.

iii). Collections through cheques / D.Ds received and entered in the Register of
cheques received:

a. The cheques / D.Ds will be deposited into the Collection Bank - Revenue Fund
after recording the details in the daily cheque collection statement (MCF 10). The
cheques will be realized after a reasonable time and given credit in the Bank scroll. So,
the other components of the Property Tax are to be accommodated in the Revenue Fund
only at the initial stage, by preparing a ‘BRV for cheques’ with the following narration:

3060 Bank A/c Dr.

3002 To Property Tax Recoverable A/c - Current Cr.

3003 To -do- - Arrear Cr.

4041 -1. Water Supply & Drainage Tax Payable A/c - Current Cr.
2. -do- Arrears Cr.

4042 -1. To Education Tax Payable A/c - Current Cr.

2. -do- Arrears Cr.
1005 - To Property Tax Excess Collection A/c Cr.
(To accommodate clear cases of excess collections)

4043 - To Library Cess Payable A/c Cr.

(To account for the collections made through cheques)
 b. At the end of the month, such collections through banks as recorded in the
General Ledger should be totalled. It should be ensured that all cheques deposited were
realized and the amounts covered by them, given credits in the bank passbook / scroll.
The amounts available on the credit side of the accounts in the General Ledger under
Code Nos. 4041 – 1& 2 and 4042 – 1& 2 shall be drawn by two separate cheques by
preparing a BPV, debiting the amounts to the above two accounts for being credited to
the Water Supply & Drainage and Education Funds in Code Nos. WS 3013, 3019, EE
3016 and 3020 respectively before 10th of next month.

(iv) Collection Through Bank:

(a) (i) In some places, the property tax collections are received from the tax
payers direct by the banks with arrangements with such banks. In the Town / City there
are branches of the bank. In such cases the main branch only is maintaining the collection
account of the Municipality. So, it is called ‘Link Bank’, as other branches of the bank
are called, collection bank branches.

(ii) All the Collection Bank Branches should prepare and send the Daily
Collection Statement in the prescribed form (MCF 9), indicating chronological collection
of Property Tax, along with the receipted copies of the remittance chalans to the LINK
BANK. In turn, the LINK BANK should send such statements received from the above
collection Bank Branches, to the Accounts Cell (Compilation section) of the Main office.
In case of no transfer of collection to the LINK BANK, the respective Bank or Banks
themselves should send the above mentioned statement to the Accounts cell of the Main
office for compilation, verification and validation.

Note:

1. Wherever the system of collections in the Zonal Offices is adopted, the Zonal
Collection centers should receive all items of revenue except those cases which are not
decentralized like Annual leases, rent of buildings and shops etc. In other words, the
treasury, functioning the zonal office should receive all items of receipts.

2. The property tax only will be directly remitted by the Tax payers at the
authorized Bank Branches.

(b) To account for the property tax collections through Bank, in places where
arrangements with the bank were made to receive the tax directly from the tax payer
through pre-prepared chalan, a BRV has to be prepared by listing out all credits given by
the bank with receipted chalans, with the following narration.

BRV for bank collections.

3060 Bank Account Dr.
3002 To Property Tax Recoverable A/c – Current Cr.
3003 To Property Tax Recoverable A/c – arrears Cr.
4041 -1. Water Supply & Drainage Tax Payable A/c - Current Cr.
2. -do- Arrears Cr.

4042 -1. Education Tax Payable A/c - Current Cr.

2. Education Tax Payable A/c - Arrears Cr.

1005 - To Property Tax Excess Collection A/c Cr.

(To accommodate clear cases of excess collections, if any)

4043 - To Library Cess Payable A/c Cr.

(being the collections made by the bank, directly from the tax payers)

Note: Wherever the period to which the payment of Property Tax could not be identified,
such amount should be credited initially to the ‘the Property Tax Collection Suspense
Account’, in Code 3004 instead of classifying it as excess collection amount, for
subsequent settlement on verification of records. In such cases, after ascertaining the
particulars, a G.J.V. has to be prepared to bring the amount to Property Tax account. The
journal entry should be,

3004 Property Tax Collection Suspense A/c Dr.

3002/3003 To Property Tax Recoverable A/c Current / Arrears Cr.

4041 - 1. Water Supply & Drainage Tax payable A/c – Current Cr.
- 2. -do- - Arrears Cr.

4042 -1. Education Tax Payable A/c - Current Cr.

2. Education Tax Payable A/c - Arrears Cr.

4043 - Library Cess Payable A/c Cr.

(To account for the tax for which the details of Assessment No. and the half year
were not available earlier but now brought to account on getting the details).

(c) The water supply & drainage Tax part of total Tax collection, will be passed
on to the Water Supply and Drainage Fund Account by issue of cheque every month, by
debiting to Code No. 4041 after preparing a BPV before 10th of next month.

(d) The Education Tax part of total Tax collection, will be passed onto the
Education Fund Account by issue of cheque every month by debiting to Code No. 4042
after preparing a BPV before 10th of next month.

(v) To account for Library cess collected and payment to LLA, the following journal
entries should be passed.

4043 Library Cess payable Account Dr.

3066 To Bank Account Cr.

(vi) Collection of Property Tax, rent etc., by adjustment in the Treasury

(a) Most of the State Government Departments pay the Property Tax, by
presenting their contingent bills in the Treasury by debiting the expenditure to their
departmental head of account and crediting the Property Tax to the Municipal Account,
by enclosing a triplicate chain.

(b) On receipt of remittance chalan (triplicate copy) and / or receipt of details of

credit from the concerned Government Department or on receipt of Treasury Scroll, BRV
has to be prepared and entry made in the Receipts Book.

(c) So far as the Corporation is concerned, in the absence of a separate treasury /

sub – treasury account maintained in the name of the Zonal office, where the collections
of Property Tax or certain other Non-Tax items such as rent for occupation of the
Corporation Buildings by the Government Buildings are attended to, the main office
which alone keeps account in the Treasury, shall initimate the details of credit for such
items to the concerned Zonal Officers so as to enable the Zonal Officers to prepare BRVs
for such collections and for bringing into account.

(5) ACCOUNTING OF DISHONOURED CHEQUES;

1. When a cheque is given by the tax payer it is entered in the Register of cheques
received and then deposited in to the bank. When it is found dishonoured, the
Collection Bank should stamp ‘Dishonoured’ vide Advice No. ________ across
the cheques and return it to the Municipal Office / Zonal Office concerned. The
Bank should also prepare a statement of ‘Dishonoured Cheques’ every fortnight
with the following particulars if an agreement with the collection bank is entered
into as such.

a) Tax payer’s Assessment number, Division number and Bill number

b) Cheque number and date
c) Bank on which it is drawn
d) Amount
e) Reasons for Dishonour
f) Reference to Sl.No. in the Register of Cheques received (In case this
statement is received from the Bank, this item (f) should be noted in the
municipal office).

2. On receipt of the above statement from the Collection Bank, the compilation
section should check the entries in the Statement of Dishonoured cheques with the
individual cheques, enter them in the Register of dishonoured cheques (MCF 12)
and then forward the statement to the Revenue branch / Zonal office where the
 demand register is maintained and the collections are posted, to take further
action, to collect the amount in CASH only.

3. As the dishonoured cheque amounts do not find place in the Bank branch daily
collection statement, in respect of cheques presented directly by the parties at the
Bank, no accounting entries are to be passed. (Included in the daily collection
statement only, on realization of cheques)

Note: The commissioner should request the bank in writing not

to give credit to the municipal account, unless and until the cheque
is realized and credited.

4. A Bank payment voucher has to be prepared in triplicate with specific

endorsement ‘Not Payable’ with the following entries for each of the cheques
dishonoured with clear indication on the face ‘BPV for Dishonoured cheques’ and
by giving cross reference of Sl. No. of the Register of Dishonoured Cheques.

3002/3003 To Property Tax Recoverable A/c Current / Arrears Dr.

4041 - 1. Water Supply & Drainage Tax payable A/c - Current Dr.
- 2. -do- - Arrears Dr.

4042 -1. Education Tax Payable A/c - Current Dr.

2. Education Tax Payable A/c - Arrears Dr.

4043 - Library Cess Payable A/c Dr.

To Bank A/c Cr.

It becomes necessary for the simple reason that the amounts covered by such
dishonoured cheques have already been brought to account in the Receipts Book as
income, through BRV for cheque collections.

The credit taken in the Receipts Book for such cheques initially, could not be set right
by means of GJV as no journal entries will find place in the Receipts Book and
Payments Book which will reflect only the transaction with the Bank. Hence, the
BPV is necessary though no payment is involved.

5. After approval of BPV, the Sl. No. in the Register of dishonoured cheques should
be noted on the back of those cheques and then the cheques filed serially. They
should not be returned to the party: but filed in the Accounts Cell. It should be
retained in the Accounts Cell, till the amount covered by each cheque is collected
in cash or by D.d. with a penalty in each case as fixed by the council. Then, on
ascertaining the cash collection, they should be handed over to the parties through
the departments concerned after obtaining acknowledgements in the Register of
cheques received and making entries in the Register of dishonoured Cheques
(MCF 12). The Sl. No. should also be noted against the original entries for
 collection of such cheques in the Register of Cheques received and
simultaneously posting details of BPV under the debit shown in the Receipts
Book.

6. The same procedure is applicable for similar dishonoured cheques under other
account heads of Income.

7. The Bank debit towards service charges for dishonoured cheques and shows the
same in the Bank Scroll. The amount so charged has to be unnecessarily met by
the Municipality.

When the dishonoured cheques are received and action taken to collect the
amount covered by the cheque, IN CASH, the following two items should
also be collected in cash from the party whose cheque was returned
dishonoured.

1. Bank charges as debited by the Bank

2. Penalty as decided by the Council

Both these items, when collected should be accounted for, in Code No.
1055 - ‘Penalty and Bank Charges for dishonoured cheques’

8. To account for the collection of Bank charges and penalty charges towards
dishonoured cheques, the following journal entry is to be made.

3060 Bank Account Dr.

1055 To Penalty and Bank Charges for
Dishonoured Cheque A/c Cr.

(6) ACCOUNTING FOR PROPERTY TAX ADJUSTMENTS ENHANCEMENTS,

REDUCTIONS, NEW ASSIGNMENTS, VACANCY REMISSIONS ETC.

1. On arriving at the total amount to be adjusted due to increase or decrease on

account of enhancement, reduction, vacancy remission etc. Property Tax
adjustment slips (MCF 11) with GJV in duplicate is to be prepared for the total
amount of adjustments, every month by the Revenue Officer. Then the G.J.V.
should be forwarded to the Accounts Cell, for accounting. One copy of the G.J.V.
is to be returned to the Revenue Department for making necessary additions in
respect of new assessments / enhancements and for revising the demand in respect
of reductions in the demand register.

2. To account for monthly Property Tax enhancement / new Assessment, the journal
entry would be.

1. 3002 Property Tax Recoverable A/c - Current Dr.

 3003 Property Tax Recoverable A/c - Arrears Dr.
1001 To Property Tax General Purposes A/c Cr.
1008 To prior year income Cr.

2. 4041 – 1/2 Water Supply & Drainage Tax Receivable Tax A/c Dr.
Current / Arrear
1002 Water Supply & Drainage A/c Cr.
1008 Priory Year Income Cr.

3. 4042 - 1/2 Education Tax Receivable A/c Current /Arrear Dr.

1003 Education Tax A/c Cr.
1088 Priory Year Income Cr.

(Being the tax increased on the orders of the Commissioner in the monthly lists)

3. To account for reduction of Tax, and for vacancy remission, the Journal entries
should be ‘passed reversely’ to the entries for enhancement as detailed above with
an additional debit to code No. 2021 vacancy remission account

(7) Accounting for Property Tax Demand and Collection for Government
Properties:

1. The Accounting procedure in respect of Property Tax / Service chares levy on

Central and State Government properties is very similar to the one demanded
from the Tax payer.

2. The complete particulars of half-yearly demands for all Divisions should be

included in one list and only the total for all divisions included in the GJV for
the raising the demand.

(8) Settlement of Demand:

The demands for property tax should be settled at the beginning of every half year and
certified to the Revenue Officer / Commissioner / Asst. Commissioner. It is equally
important to indicate that the preparation of annual demand, collection and balance
statement for all revenue items is a pre-requisite for the compilation of accounts, as the
account figures of all revenue items should be in agreement with the figures in the
statement.

b) OTHER TAXES, FEES, LEASES AND OTHER INCOME – ACCOUNTING

Profession Tax, Trade licence fees, Licence fees under P.F.A. Act, Parking fees, Market
fees, Bus Stand fees, Lease / Rent on shopping complex, Fees for advertising on Lamp
posts, Encroachment fees etc, where the demand is finalized at the end of the previous
year or at the beginning of the financial year (Accounting year)

1. (a) In cases of certain items of income, where the demand for the year is
finalized as on 1st April, the demand accounts become recoverable, in this
accounting year. So, the demand register, generally called MDR, should be
written up for the year before 15th April and the amount under each head of
revenue items that is to be demanded and collected has to be treated as
‘Income’ for the year. Necessary General Journal Vouchers are to be prepared
for them and forwarded to the Account cell for Accounting.

(b) In respect of demands that are raised during the course of the year viz.,

(i) New trades commenced for which Licence fees are demandable.
(ii) New shopping complex completed and leased out
(iii) New area brought under ‘Levy of Parking Fees’
(iv) New Lamp posts added for advertising
(v) New encroachments detected and unobjectionable encroachments
brought under Levy of Fees, fresh demands for the past of the year
have to be raised and the amount calculated in the above cases.

2. (a) The GJVs are to be prepared by the departments concerned and forwarded
to the Accounts Cell for compilation of ‘Asset Items’ as indicated below.

(i) Profession Tax – recoverable

(ii) Trade Licence fees – recoverable
(iii) Licence fees under P.F.A. Act – recoverable
(iv) Parking fees - recoverable
(v) Market fees - recoverable
(vi) Bus stand fees – recoverable
(vii) Lease / Rent on shopping complex - recoverable
(viii) Fees for advertising in Lamp posts recoverable. Encroachment fees
– recoverable etc.

(b) The above GJVs should be given effect to, by noting the amounts in the
General Ledger by the Accounts cell and the other copies therefore will be
sent back to the concerned departments for watching periodical collection.

(c) The following journal entries have to be passed as shown below in respect
of all such items.

(i) 3005 Profession Tax Recoverable Account – current Dr.

1006 To Profession Tax A/c Cr.
 (ii) 3009 Licence fees Recoverable A/c – current Dr.
1017 To Trade Licence Fees A/c Cr.

(iii) 3011 - Lease amount recoverable current Dr.

1022 - Market Fees (Daily Market) Annual Lease Cr.
3011 - Lease amount recoverable current Dr.
1023 - Market Fees (Weekly Market) Annual Lease Cr.
3011 - Lease amount recoverable current Dr.
1028 - Fees for bays in bus stand Cr.

(d) Collection:

The prescribed remittance chalans (MCF 2) should be used for collecting the
amounts under the above Revenue items and the amounts accounted for under
the respective Income code Nos. The code Nos. as given in the manual
volume – II should be used while preparing the chalans for remittance of
money, more specifically for ‘Current’ and for ‘Arrears’.

3. Income Collected and Received from Other Agencies

(a) In respect of following items of income viz

(1) Duty on Transfer of Property

(2) Entertainment Tax
(3) Assignment of Sales Tax
(4) Magisterial fines and
(5) Grant, Compensation etc, given by the State Government, the
demands could not be ascertained in advance. Hence the
actual receipts are taken as income and no journal vouchers
are to be prepared for raising demand in these cases. The
receipts are to be accounted by BRVs only.

(b) The sanction orders are received for the income items mentioned inSl.
No.s (1),(2), (3) and (5). So, a BRV is to be prepared based on the sanction order
and the amount accounted for in the Receipts book. The actual credit in the Bank
or in the Govt. , Treasury watched through the Bank reconciliation Statement, if
the amount is not credited in the Bank or in the Govt. Treasury within the month
in which it is accounted.

The accounting entry will be

Bank A/c Dr.

1046 To Duty on transfer of Property Cr.
ad so on
(To account for the duty on transfer of property sanctioned by the Collector)

4. Items of Income – Variable:

(i) In respect of items of income which have no fixed demands and

are variable in nature, the actual receipts in a particular year should
be taken as INCOME.
(ii) Some of these items are given below:

(1) Building Licence fees

(2) Fees for extracts of Birth & Death registration register
(3) Rental collections from Kalyana Mandapams
(4) Miscellaneous Income
(5) Grants, Subsidies, Contributions
(6) Sale of rubbish
(7) Avenue Receipts
(8) Hire Charges for Road Rollers
(9) Charges for demolition of unauthorized construction
(10) Road formation charges.

Relevant Registers like Miscellaneous Demand Register in the Revenue

Department, the MDR for Grants in the Accounts cell, other Registers for the
Income mentioned above, etc., should be continued to be maintained in the
respective Departments to account for and to assess the total collections in a year.

(iii) All the above items are collected in the Municipal Treasury
through the chalans (MCF 2). These items are recorded in the
Chitta Maintained by the Shroff who receives the cash in the
Municipal Treasury, and then accounted in the Receipts Book
through the BRV for the day.

The accounting treatment will be

Bank A/c Dr.
1019 To Building Licence Fees Cr.
and so on.
(To account for the licence fees and other items of Revenue
collected in the Municipal Treasury).

5. Advance Collection of Licence Fees:

(i) In the case of trade licence fees, the amounts are collected in
advance of the commencement of the financial year. At present,
they are collected in the months of February & March and
accounted for under the head ‘Deposit’ for accounting purpose.
The amount so kept in the deposit is transferred after the
 commencement of the financial year by a transfer entry voucher
(T.E.Vr.)
(ii) In this System, the amount of Licence Fees collected in a year is
construed as due for the year in which it is collected, though the
grant of Licences is for the next year. The issue of Licences by the
Municipality in advance of the commencement of the year is a pre-
requisite to the conduct of certain trades. As such, the collection
made in the year earlier to the year to which the Licences pertain,
need not be considered as advance collection, and it could be taken
as income of the year in which it is collected.
(iii) The licence fees are collected in the Municipal Treasury thro
Chalans (MCF 2). Hence they are recorded in the CHITTA and
included in the daily collections and then accounted for, in the
Receipts Book through a B.R.V.

CHAPTER – 03

CASH AND BANK ACCOUNTING

(1) The Cash and Bank Accounting covers the following types of transactions in all
Urban Local Bodies.

1. Receipt of cash directly / through money orders / cheques / demand drafts etc. at
Treasury.
2. Remittance of those receipts into Bank
3. Accounting of such receipts in the Accounts cell and other departments to which
they relate
4. Accounting of dishonoured cheques
5. Accounting of payments through cheques
6. Debit Advices received from Bank (other than transfers and dishonoured cheques)
7. Credit Advices received from Bank (other than transfers and reversals of issued
cheques)
8. Inter Fund Transfer
9. Preparation of monthly Bank reconciliation statement
10. Investment in and renewal of Fixed Deposits
11. Receipt of interest and accrual of interest on deposits
12. Withdrawal and Fore-closure of Fixed Deposits.
13. Reconciliation of outstanding deposits.
14. Accounting of Staff advances and other advances.
15. Receipt and Repayment of Deposit
 16. Reconciliation of pending advances.

(2) Accounts in the Banks:

a) i) Separate Bank Account should be maintained for revenue receipts. In cases

where the Municipality is collecting the Property Tax through various Banks like State
Bank of India, Indian Bank, Indian Overseas Bank, Canara bank or Co-operative Bank
etc., only Receipt (collection) Account has to be maintained. This Bank is called
‘Collection Bank’ and the account head under ‘Assets’ will be ‘Collection Account…..
Bank’ The balances in such Collection Account will be periodically transferred (as
agreed upon) to the Payment Account on the centralized Bank through cheques.

ii) Similarly, there should be a separate Payment Account in one or two Banks
authorized in this behalf. This Bank is called ‘Payment Bank’ and the account head under
‘Assets’ will be ‘Payment Account ….. Bank’. This can even be maintained separately in
one or two Banks where the Collection Account is maintained. To make it more clear, if
both the accounts are maintained in one Bank, there will be one Account No. for receipts
and another distinct account No. for payments. If there are two Banks authorized for this
purpose, there will be four Accounts i.e. two separate Accounts, for receipts and
payments in one Bank and similar two Accounts in another Bank. However, it is not
necessary to maintain two separate Payment Bank Accounts; but it is let to the
convenience and necessity of the Municipality, to decide on the number of Payment
Banks and on the frequency of the operations in each Bank.

b) In respect of Capital Fund it is enough if a separate Bank Account both for

receipts and payments is maintained in order to ensure that Government grants and loans
received for projects, schemes and capital works and amounts received for Deposit works
are directly accounted and not diverted for meeting revenue expenditure.

c) Similar Bank Accounts have to be maintained separately for Water Supply &
Drainage Fund Account and Elementary Education Fund Account and also for
Devolution Fund and for any other schemes as per the conditions and specific
instructions of the funding agencies / the Government.

(3) Receipt of Cash / Cheque at Bank: (page 53)

(a) In certain Municipalities / Corporations arrangements have been made with selected
Banks to accept the Property Tax remitted by the Tax Payers direct, by presenting the pre
prepared triplicate chalans (MCF ) for Property Tax only. In such cases, as explained
elsewhere in this Manual, the collections accepted in the Collection Bank branches are
transferred to the LINK BANK, with the Daily Collection Statement and the copies of the
receipted chalans marked for the Municipality / Corporation. The LINK BANK, after
giving a single credit entry for the total amount specified in the Daily Collection
Statement, will forward them to the Accounts Cell. Regarding direct remittances by the
Tax Payers in the Link Bank itself, the same procedure should be followed. The receipt
and accounting of the Daily Collection Statement with the receipted chalans will be
watched by the Cashier / Accountant / Accounts Officer.

(b) After due verification, a BRV will be prepared by the Cashier for the amount covered
in the statement mentioned above and sent to the Accounts Cell over the signature of the
Manager for the amount being taken as receipt in the Receipts Book. The receipted
chalans will then, be forwarded to the Revenue Department by the Cashier for giving
postings in the Property Tax Demand /Arrear Demand Register in respect of the Tax
assessment nos. covered in those receipted chalans, after recording them in the respective
Property Tax Chalan Register.

(c) The supporting document for preparing the BRV referred to above, is the statement of
Collection given by the Bank with the receipted chalans (MCF 1 in the case of Property
Tax). Generally, the banks with whom agreement is signed for the purpose of receiving
the property tax collection directly from the tax payers, retain the money so collected
with them for about 10 days for purpose of their bank balance and they do not claim any
‘collection charges’ for such service rendered by them.

So, the duration of the statement referred to above as also the preparation of BRV
therefore, will be ten days.

(d) In respect of cheques presented by the Tax Payers directly at the bank with the chalan
(MCF 1) for remittance of Property Tax, the credits are provided by the Bank, only after
realization of cheques. Hence there will be no case of dishonoured cheques for which no
treatment is required inaccounts.

Note: The Commissioner should request the Bank in writing not to give Credit to the
Municipal Account, unless and until the cheque is realized and credited.

(4) Receipt of Cash at Treasury:

1. The system of collecting Property Tax in cash through Revenue Assistants by carbon
process is continued. Every day, the Revenue Assistants will enter the details of
collection in the Chalan Register, (MCF 13), and after totaling and getting them checked
by the Assistant in the Revenue Department with this signature, remit the amount to the
Shroff at the Treasury. The Chalan Register is to be maintained with perforated sheets.
The shroff, on receipt of money, will affix his signature with seal both in the chalan
register and the perforated sheet which should be torn off for being enclosed to the Daily
Treasury collection statement (Chitta abstract MCF 14 A & B) to be sent to the Accounts
cell (compilation section) daily.

So far as collections made departmentally (Market fees, Pay & Use Latrine fees, Bus
stand fees, parking fees etc., collections made in information centers in office for sale of
forms) are concerned, only statements of receipts with code Nos. will be prepared in
duplicate by those concerned and got them signed after check by the Manager before
remittance in the treasury.
The shroff, on receipt of money, will affix his signature with seal in both the statements,
retaining one for being enclosed to the chitta abstrat MCF 14 A & B).

Note: (1) The triplicate chalans should not be used for collections made departmentally.

(2) The statements of receipts for departmental collections should bear only the Sl.
No. of the day in the Chitta and not the Sl. No. of the triplicate challan, as the triplicte
chalans are meant for remittance by the third parties ony.

2. The shroff shall receive money through triplicate chalans from the Tax payers
and the public by assigning Sl. Nos. on yearly basis commencing from 1st April. The
chalans will be signed by the cashier and the Admn. Officer / manager.

(3) All cash received from Revenue Assistants / Departmental Staff and Tax payers
should be entered in the chitta (MCF 14). At the end of the day, the collections should be
totaled and tallied with cash on hand. The existing double lock system in the Treasury
and remittance into Bank next working day will continue. The abstract, otherwise called,
‘Daily Treasury Collection Statement’ (MCF 14 a& b) will be forwarded to the Accounts
cell with the Bank Receipt Voucher supported by receipted chalans, which (Accounts
Cell), in turn, after verification of the statement and the BRV will make postings in the
Receipts Book, retaining the copies of receipted chalans, there itself.

It must be noted that the retention of receipted chalans in the case of remittance of
Property Tax directly in the Bank, by the Tax Payers, will not arise, as one copy of each
of the chalans is retained by the Banks themselves. Simultaneously one copy of receipted
chalan must be sent to the concerned department, by the Accounts Cell under proper
acknowledgement. In the above process, no copies of receipted chalans should be
retained in the Treasury.

(5) Collection through cheques and Accounting them:

When a cheque is received, it should be entered in the Register of cheques received, kept
under the control of the Manager / Admn. Officer. Generally, all cheques are received
with covering letters indicating therein the required details for remittance. After checking
the correctness of such details with the department concerned, the cheques will be handed
over to the shroff / cashier, who will prepare pay-slip for being deposited into Bank and a
daily cheque collection statement in duplicate (MCF 10) will be prepared by the shroff
duly signed by the Manager / Admn. Officer. One copy of the statement will be
forwarded with Bank Receipt Voucher to the Accounts cell for recording the receipts in
the Receipts Book.

(6) Accounting of Receipts in the Accounts Cell:

(a) The following documents will be available on daily basis in the Accounts cell as far as
receipts / cash are concerned, with Bank Receipt Vouchers.
 1. Perforated copy of chalan register (MCF 13)
(for Taxes collected through Revenue Assistants and statements of Receipts
for departmental collections)
2. Abstract of chitta (MCF 14 a & b)
3. Copies of Receipted Chalans (MCF 1 & 2)
4. Daily Cheques Collection statement (MCF 10) with the Bank Receipt
Voucher.

(b) In respect of collections made at collection centers (zonal offices) and remittance
direct to Bank, the system prescribed for Treasury in the Central Office as enumerated
above should be followed by the Zonal Officers. The BRVs have to be prepared for
recording the transactions at collection centers (zonal offices) as detailed above and the
Sl. Nos. in them should have prefix as ZA, ZB, so as to identify their place of origin.

(c) In respect of direct remittance by Tax payers at various Bank branches, the collection
statement, along with the chalans, for which single credit entry is given by the Link Bank
in the Bank scroll, should be treated as chitta statement, based on which BRV has to be
prepared by the Cashier and sent to the Accounts Cell (compilation section).

Regarding direct remittances by the Tax payers in the Link Bank itself, the above
procedure should be followed.

(7) Fixed Deposits:

The entries to be passed to account for the following items are given in the manual
volume – II with the required descriptions.

a) i. Cash received at treasury and remitted into Bank.

ii. Cheques / DDs received and deposited into the Bank.

b) Interest / Bank charges debited by the Bank (Debit Advices).

c) Interest received from the Bank (Credit Advices)

d) Transfer of amount from one bank to another by issue of cheques by

simultaneously making entries in the Bank Transfer Book

e) Investments in Fixed Deposits:

i) Interest received on Fixed Deposit
ii) Withdrawal of Fixed Deposit
(By making necessary entries in the investment register)

1. To account for investment in fixed deposits

3070 Fixed Deposit Account Dr.
 To Bank Account Cr.

2. To account for interest accrued on Fixed Deposits

3025 Interest accrued on Fixed Deposit A/c Dr.
1067. To interest on Fixed Deposit A/c Cr.

3. To account for interest actually received on Fixed Deposit from Bank

Bank Account Dr.
3025 Interest accrued on Fixed Deposit A/c Cr.

4. To account for withdrawal of Fixed Deposit on maturity or pre-mature

withdrawal Bank Account Dr.
3070. To Fixed Deposit Account Cr.

Necessary entries have to be made in the Investment Register by allotting separate folios
for each Fund, for all such transactions.

(8) Stale Cheques:

(a) In respect of cancellation of cheques and time-barred cheques, the journal

entries need not be reversed. Fresh cheques shall be issued against cancelled cheques
wherever necessary duly obtaining foils of the cheques cancelled and making necessary
endorsements as such and time-barred cheques could be re-validated without issuing
fresh cheques. In other words, in those cases, the existing procedure will continue.

(b) In the case of stale cheques, a separate account should be opened to which all
stale cheques should be regularly transferred.

CHAPTER – 04

STAFF SALARIES AND RECOVERIES ACOUNTING

(a) SALARIES ACCOUNTING

1.Monthly Salary Bills :

(i) The general principal is that all claims should be settled after observing
formalities with regard to their bonafide and the correctness of the bills
presented by preparing the prescribed journal vouchers and bank payment
vouchers along with the bills that are passed for payment, by the authorised
officer. In other words, a liability should be created first on each claim, by
preparing a journal voucher ( EJV / CJV / PJV).

(ii) The present system of preparing the pay bills by respective departments and
approving them by the Heads of Departments like, Commissioner / Manager
(under delegation), Accounts officer, Municipal Health Officer / Sanitary Officer,
Municipal Engineer, Town Planning Officer etc. shall continue.

(iii) In this system, each department should maintain office copies of pay bills
only in a bound volume which will be used for one or more year in each
department . Every month, as soon as the pay bill, in each department, is
prepared with reference to the sanctioned strength, previous month’s
salary bill, Advances recoverable register and water register for recovering
P.F advance and other advances, an abstract with the relevant details
should be prepared in the prescribed form – Abstract of Salary bill (MCF
16).

(iv) The office copy of the pay bill with the abstract of the salary bill and an
EJV Should be forwarded to the Accounts cell, for check. After Check
regarding the correctness of the debit & credit, the office copy should be
forwarded to the Assistants maintaining the P. Accounts and Advance
Accounts for giving postings in the P.F Abstract register / ledger,
Advances recoverable register etc. and for ensuring the corrections of
deductions made.

(v) After the above check and postings are over, the Accountant / Accounts
officer shall make pass order on the bill (Abstract as well as office copy of
the bill) for the amount approved for payment and approve the EJB by
debiting ‘Salaries Accounts’ under the relevant account codes and
crediting various Staff Advance accounts, and various recovery accounts
under relevant heads of Assets and Liabilities. The income tax, wherever
liable, should be deducted at source (i.e. salary bill itself).

The journal entry will be as follows:

(2001 – 2011) Salaries Account Dr.
Note: The code numbers (2000 – 2011) are common to the salaries bills of all
Departments. When the salaries bills are prepared, the respective departmental
prefix should be given to the above code Nos.

3028 To Festival Advance Account Cr.

3045 To Marriage Advance Account Cr.
3027 To House Building Advance A/c Cr.
4021 To P.F. Recoveries A/c Cr.

(1) Subscription
(2) Recovery of temporary advance
4022 To Co-operative Society Loan recovery A/c Cr.
4023 To RD Recoveries A/c Cr.
4029 To I.T. deducted at source (TDS) Cr.
4030 To Bank Loan recovery A/c Cr.
4044 To Salaries payable A/c (net amount) Cr.

The above are only sample entries.

(vi) Thus, accounting of salaries bills is ensured. The credit entries wil find
place against respective code Nos. under Revenue Fund. Then,
payments against these entries have to be commenced in the first week
of every month, to clear the liabilities, except Salaries Payable Account.
If it is possible, to clear these liabilities on the ‘Pay day’ itself, BPVs
may be prepared and cheques drawn for these amounts.

(vii) A Bank payment voucher is prepared in the Accounts Cell and cheques
drawn by debiting ‘Salaries Payable A/c’ and crediting ‘Bank A/c’ on
the Pay Day to disburse the net amount of salaries.

The journal entry will be as follows:

4044. Salaries Payable A/c Dr.

To Bank Account Cr.

(Note: For all payments BPV shall be prepared
in the Accounts Cell)

(viii) All the amounts available under ‘credit’ have to be adjusted in the
cases of advances paid and those credited to the Liabilities paid to the
respective accounts by means of cheques by preparing a BPV as
mentioned in sub para (vi) above. It should be noted that the gross
salaries are booked on the last working day of the month as the salary is
paid on that day.

(ix) So, as regards adjustments of employees’ personal advances, the

respective advance accounts are credited as and when the EJV is
approved. In other words, the adjustment of these personal advances
(recovered) is done simultaneously, when the gross salary is accounted
for, on the last working day, in view of the fact that no Payment is
involved in them.

(x) The interest on ‘Interest-bearing advances’ recovered is credited

under ‘Code No. 3047’ interest on staff advances recoverable account.

(xi) As mentioned earlier, as the salaries are paid on the last working day
of the month, cheques are drawn for the net amount only (Salaries
Payable Account). After the month is over, i.e. in the first week of the
next month, all credit entries in the EJV prepared earlier, should be
 examined and separate BPVs prepared to clear all the Outside Payments
(like RD, PF, Society, Bank loan etc.) by drawing cheques.

The journal entries in the BPV will be as follows;

4021 P.F. recoveries A/c Dr.

To Bank A/c Cr.
And so on for each item

II. Supplemental Bills:

(a) At present, the claims by supplemental pay bills for surrender leave salary, leave
salary, arrears of pay and allowances etc. are settled by preparing detailed bills.
The system applicable to the monthly pay bills should be followed.
(b) Based on the abstract of salary bill in MCF 16, an Expense Journal Voucher
(EJV) should be prepared. Then payment is made by preparing a BPV and issuing
a cheque.

The journal entries will be the same as for monthly pay bills.

III. Personal Advances – Payment and Recovery:

(a) Payment:

(i) The accounting procedure for advances and the recoveries is detailed
under ‘Advances’ in the chapter on ‘Deposits and Advances
Accounting’. The payment of advances to the employees like Festival
Advance, Khadi advance, Handloom advance, Advance of pay on
Transfer, Advance of Transfer T.A., Tour advance, etc. which are
personal to the employees, for which applications are received, is
processed by the departments / sections dealing with pay bills.

(ii) When the applications for sanctioning Festival advance, Handloom

advance, Advance of pay on Transfer, Advance of Transfer T.A., Tour
advance etc, which are interest free and conveyance advance, Marriage
advance, House Building advance etc. which are interest bearing, are
received, they are processed and santion accorded by issuing
proceedings. A claim is made through a BPV enclosing a copy of
sanction order and giving details in the BPV itself. No ournal voucher
is necessary for paying advance.

(iii) The following journal entries should be made:

e.g.
3028 Festival Advance A/c Dr.
To Bank A/c Cr.
 (iv) A cheque for the advance is drawn and the amount paid, after making
entry in the Advance Recoverable Register at the time of passing the
claim itself.

(b) Recovery:

When the F.A. etc. is recovered through bills, the following journal entry only is
made as detailed under the main bill. As no payment is involved, no BPV is prepared.

The journal entry for the recovery will be:-

2001-2011. Salaries A/C Dr.
3028 To F.A. A/C Cr.
….etc.

(c) Remittance of FA etc. in cash:

(i) There may be instances where the employees remit F.A. etc. in cash.
In such cases, the cash is remitted through chalans with code No. etc.
in the Treasury. This chalan is included in the daily collection at the
Treasury and accounted for, through BRV prepared for the day and
reflected in the Receipts book. The Assistant in charge of Advance in
the Accounts section should, with reference to the copy of the
receipted chalan given to him, give postings in red ink, for this credit
in the Advance Recoverable Register, maintained by him.

(ii) By the above two methods, the timely recovery of advances is to be

watched

(d) Corporations – Salary Bills – Recoveries made in the Salary Bills – Accounting
System:

(1) In the Municipal Corporations, in the main office, the

Commissioner or the Assistant Commissioner (Accounts) is the
drawing officer. In the zonal offices, the Assistant
Commissioners concerned are the drawing officers. Major
expenditure is on the salary bills. The funds required for
expenditure in the zonal offices are received from the main
office only with reference to the “financial forecast” Sent by the
Assistant Commissioner to the commissioner every fortnight.
 (2) The following accounts relating to the staff members in the main
office and the Zonal offices are maintained in the main office
only.

1. Provident Fund A/C.

2. Special Provident Fund A/C.
3. Group Insurance Scheme A/C.
4. Health Fund A/C.
5. House Building Advance A/C.
6. Marriage Advance A/C.
7. Advance paid to the Staff Members working in the Zonal
Offices but such advance was paid in main office or other
zonal offices; but the instalments recovered from their pay
bill sin zones in which at present they are working.

So, it is the responsibility of the main office i.e. Assistant Commissioner (Accounts), to
maintain properly the above accounts. In order to keep proper accounts, the main office,
Assistant Commissioners in the Zonal Offices should, promptly, intimate the main office
of the amounts recovered from the Salary bills & the Supplementary bills by the way of
journal Voucher every month.
(3) As soon as the monthly salary bills are drawn the Zonal Offices,
the amount deducted in the salary bill, relating to the Accounts
maintained in the main office, should be listed out in a statement
to be prepared in triplicate. An EJV may also be prepared in
triplicate.

The EJV prepared in the Zonal Office should contain the following Entries.

4021 Provident Fund deductions Dr.

4025 Special Provident Fund Dr.
4026 Group Insurance Scheme Dr.
4027 House Building Advance by the C.M.A. / Main Office Dr.
4033 Health Fund Deductions Dr.
3028 Festival Advance required Dr.
4077 To Inter Zonal Transfer A/c – Main Office Cr.

Note: For all the above recoveries there are credit balances in the general ledger of the
Zonal Offices. As they are now transferred to the main office, those accounts are now
debited by crediting to code no. 4077.

(4) Two copies of the above EJV with a statement prepared should
be forwarded to the main office

(5) As regards Accounting the amounts so recovered in the Zonal

Offices, the following procedure has to be followed in the main
office.
 (6) On receipt in the main office the Assistant Commissioner
(Accounts) shall arrange for preparing an EJV in duplicate for
the amounts so transferred from the Zonal Offices with a
statement and EJV in duplicate, the following journal entry.

4077 Inter Zonal transfer Account – Concerned Zonal Office Dr.

4021 P.F Deductions Cr.
4025 S.P.F. Deductions Cr.
4029 G.I.S. Deductions Cr.
4027 H.B.A. By the main office / C.M.A. Cr.
4033 Health Fund Cr.
3028 Festival Advance Cr.

(The first copy of this EJV along with the accepted copy of the Zonal EJV shall be sent to
the concerned zones.)

(7) By this arrangements, when the consolidated trial balance is

prepared, for the Corporation as a whole, incorporating the trial
balances of all Zones and the Main Office for a month, the debit
and credit raised both in the main office and the Zonal Offices
will be cleared in the code no. 4077

(8) The Assistant Commissioner (Accounts), in the main office,

shall arrange for making entries for the amount so transferred
under the respective asset and liability codes, the Abstract of
recoveries made and in the sub-ledgers such as P.F. abstract
Register, Advances, Recoverable Register etc, maintained in the
main office.

(9) The Entries thus made in the abstract of recoveries from the
salary bills of the main office and the amounts transferred from
the Zones, the Inter Zonal Transfer Account, the remittances
should be made to the credit ‘Deposit Account’, other
Government Accounts etc, by drawing cheques through BPVs.

(10) By the above arrangement, the liability of the Zonal Offices is

passed on to the main office, which, in turn, takes care for
prompt clearance and remittance to the respective accounts.

(11) The same procedure should be adopted for transfer of amounts

(11) (recovered from salary bills) from one Zonal Office to
another within the Corporation.
b) (1) PROVIDENT FUND ACCOUNTING

At present, the Provident Fund Account is maintained, separately, for the employees of
the Municipalities. The subscription and recovery of Temporary advance are credited, by
deducting from monthly salary bills.

Payments of Temporary advance, part-final withdrawal and final closure of accounts are
made through individual cheques drawn in favour of the employee concerned.

(2) The rules relating to Government servants in G.P.F. (T.N.) rules are followed. The
recoveries made are consolidated and remitted, by cheque, into the ‘T.Deposit account’ at
the Government Treasury. The following records are now, maintained:

1. P.F. Abstract Register for posting credit and debit entries – Account holder
wise
2. P.F. Ledger for calculating interest, based on the monthly balances in the
individual accounts.
3. P.F. Cash Book
4. P.F. Treasury pass Book or Treasury scroll (Monthly)
5. Cheque Book issued by the Treasury Officer, on payment of cost.

(3) The monthly balances in the Government Treasury carry interest at the rate prescribed
by the Government. So, the Municipalities, as soon as the financial year is over, are to
prepare the statement of monthly credit & debit in ‘T’ Deposit Account in respect of their
institutions in the prescribed proforma and claim the total interest due for a year from the
Director of Local Fund Audit who sanctions the payments to them. This work should be
completed immediately after the financial year is over, but before the audit is taken up, so
as to get the interest due, on T. Deposit Account, sanctioned by the Director of Local
Fund Audit without any delay.

(4) Since the Provident Fund Account is out of a trusted nature, it should be kept separate
and distinct from the REVENUE FUND of the Municipality.

(5) The existing instructions for administering this Fund are adequate. It is quite essential
that they are scrupulously followed. They should see that the sum total of the closing
balances in individual accounts as on the last day of the financial year TALLIES with the
closing balance of that financial year in ‘T.Deposit Account’ as certified to by the
Treasury Officer. The interest calculated and sanctioned as indicated in para (3) above
will be credited after sometime in the next year, after it is sanctioned by the Director of
LF Audit.

(6) (a) There will be some different between the interest on the Treasury Balance
sanctioned by the Director of LF Audit and the sum total of interest calculated on the
individual’s account. This may be due to
 (i) Delay in remittances of monthly recoveries to ‘T.Deposit Account’
(ii) Failure to remit at all and
(iii) Diversion of this amount for day to day expenditure etc.

In such circumstances, the interest sanctioned by the Director of Local Fund

Audit will be less than the total amount of interest calculated and credited to
individual’s accounts. This difference may be met from the Revenue Fund / Water
Supply and Drainage Fund of the Municipality, with the specific sanction of the
council, on analyzing the reasons for difference and recording them in the form of
a council resolution.

(b) The amount of such difference will be an expenditure in the Revenue Fund and it
should be debited to ‘2055 – Staff Welfare Expenses’. The cheque drawn for this amount
should be deposited into the Govt. Treasury for being credited to ‘T.Deposit Account’
maintained in the name of the Municipality by the Treasury Officer.

(7) In the accrual system of accounts, the maintenance of this P.F. account is not
disturbed.

(ii) Special Provident Fund – cum – Gratuity Scheme:

Since this is also of trusted nature, it should be kept separate from the REVENUE FUND.
Eventually, it will be a self supporting fund in view of the fact that the accumulations of
monthly collections are to be deposited in the Financial Institutions of the Government,
fetching more interest. The Commissioners should pay due attention to the timely deposit
of subscription in interest bearing securities, and get better financial return.

However the Municipalities where the Instructions issued in G.O. Ms. No. 693 M.A. &
W.S. dt. 24.7.90 and G.O.Ms, No. 230 MA&WS dt. 20.10.93 for remittance into
Government Account are now being followed, shall continue to follow.

The management contribution as fixed by the Govt. (presently Rs. 5,000/- in individual
cases) on the eve of retirement when the individual SPF-cum-Gratuity Account is closed,
shall be met from the Revenue Fund Account / Water Supply Fund A/c as the case may
be by debiting to Code No. 2034 ‘Special Provident Fund Gratuity Scheme’ –
Contribution.

(c) RETIREMENT BENEFITS – ACCOUNTING

Payment of Pension / Family Pension / Commuted Value of Pension and Death-cum-
Retirement Gratuity

1. The Code Nos. are provided in the Chart of Accounts for payment of Pension,
Commuted value of Pension and Gratuity and they should be used. The journal
entries (EJVs) will be as indicated below:
 (a) 2031. Pension (Super annuation) / Retiring /
Invalid etc. / Family pension Dr.
4046 To Accounts Payable A/c – Personal Claims Cr.
4046 Accounts Payable A/c – Personal Claims Dr.
To Bank A/c Cr.

(b) 2032. Commuted Value of Pension Dr.

4046 To Accounts Payable A/c – Personal Claims Cr.
4046 Accounts Payable A/c – Personal Claims Dr.
To Bank A/c Cr.

(c) 2033 Death -cum-Retirement

Gratuity A/c Dr.
4046 To Accounts Payable – Personal Claims Cr.
4046 Accounts Payable – Personal Claims Dr.
To Bank A/c Cr.

Similar retirement benefits payable to the employees whose monthly salaries

are debitable to the Water Supply and Drainage Fund Account are chargeable
to that fund account.

2. The scheme of payment of retirement benefits is in force in the Local Bodies, as

follows:

i) As far as Municipal Corporations are concerned, the

retirement benefits for all the employees retired / retiring and
payment of Family Pension to the members of the deceased
employees are directly made by them, from the Revenue
Fund.
ii) In the case of Municipal employees who are covered by the
Municipal Employees Pension Fund maintained and operated
by the Director of Local Fund Audit, the pension contribution
at prescribed rates is payable to that Fund, by the
Municipalities as per the demand raised by him. Payments
are made from that Fund only.
iii) In respect of employees who are not covered by the above
Fund, the payments of retirement benefits and Monthly
Pension / Family Pension are being made directly from the
Municipal Fund based on the Audit Certificated.
iv) (a) In order to make timely pension disbursements, the
Govet. Ordered inG.O. MS.No. 110 MAWS dt. 3.5.97 to
deduct from the quarterly payment of the amount under
Devolution Fund released by the Directorate of Municipal
towards this Fund on the strength of the demand raised by the
Director of Local Fund Audit and credited to the fund
 maintained by him. By this process, the liability of the
Municipality towards contribution to the pension fund is
directly met out of the Devolution Fund. So, the above
transaction should necessarily reflect in the accounts of the
Municipality.

(b) The following entries shall be made for the above

DEDUCTION made by the Directorate of Municipal
Administration through GJV.

2039 Pension contribution Dr.

1053 To Devolution Fund Cr.

(By this journal entry, the credit to Code No. 1053 will indicated the total amount
sanctioned under the Devolution Fund, inclusive of the amount adjusted towards the
Pension Fund maintained by the Director of Local Fund Audit.)

3. The Register of Pensions and Family Pensions will continue to be maintained in

the Accounts Cell for making monthly postings for disbursements, on the lines of
the Establishment Audit Register.

CHAPTER – 05

EXPENSES ACCOUNTING

Expenses Accounting deals with the following types of transations;

1. Advances for expenses

2. Travel expenses
3. Leave Travel concession
4. Pre-paid expenses
5. Repair and Maintenance
6. Payments of Electricity Consumption charges, Telephone Bills etc.,
7. All expenses other than those that are dealt with under Suppliers / Materials
Accounting

All the above expenses are to be accounted for, by preparing Expenses Journal Vouchers
(EJV).
I. Advances for expenses:

Generally, payments are made after services are rendered to the Municipality or supplies
are made to it. However, there may be instances where, an advance is to be paid and then
services are got done or supplies received. In such cases, the payment of advance
becomes necessary. For paying advance, the bank payment vouchers have to be prepared,
after observing formalities, duly signed by the officials who are initiating the claims and
will be forwarded to the Accounts Cell. There is no need for an EJV.

On receipt, by making entry in the Bills Inward Register (MCF 15 B), the Accounts cell
will examine the correctness of the claim and pass for payment after making entry in the
Advance Recoverable Register.

The B.P.V. will be prepared in the Accounts Cell as below:

3054. Advance Recoverable A/c – Expenses Dr.

To Bank Account Cr.
(Being the advance paid to …………
for …………. as sanctioned by the ………..)

II. Adjusting the above Advance:

(a) When the bill for services or supplies is received by adjusting the above advance,
an EJV and the BPV have to be prepared by the user – department and signed
after ensuring the satisfactory servicing or the purpose for which the advance was
paid was over. After approval by the officer concerned, the EJV with BPV should
be forwarded to the Accounts Cell for adjusting the advance paid earlier and
settlement of the claim, over and above the advance paid.
(b) The Accounts cell, after examining the claim and after posting the advance
adjustment in the Advance Recoverable register, shall pass the claim and issue the
cheque in full settlement. The following journal entries will be passed, if the
advance is less than the claim (bill prepared).

Specific Expenses Account Dr.

3054. To Advance Recoverable A/c – Expenses Cr.
4049. To Accounts payable A/c – Expenses Cr.
4049. Accounts payable A/c – Expenses Dr.
To Bank Acount Cr.

(c) (i) When the advance paid is more than the bill for services rendered or supplies
made, the balance amount should be remitted back in cash or by cheque.
This remittance of the balance is being accounted for, in the Receipts Book through
BRV. The accounting entry for the above remittance is

Bank A/c Dr.

3054 To Advance Recoverable A/c – Expenses Cr.

(ii) When the bill for the services is approved and the expenditure is accounted, the
following Journal Entry should be passed.

Specific Expenses A/c Dr.

3054 To Advance recoverable A/c – Expenses Cr.

III. Expenses for which advance paid:

Where no advance was paid, after observing the above procedure in regard to
settlement of the claim, the bill along with BPV and EJV duly signed by the
departmental officer concerned will be forwarded to the Accounts cell which, in turn,
will pass it and make payment after scrutiny. The following journal entries will be
made.

In the EJV

Specific Expenses Account Dr.

4049 To Accounts payable A/c – Expenses Cr.

In the BPV

4049 Accounts payable A/c – Expenses Dr.

To Bank Account Cr.

IV. Travel Expenses and LTC:

The above procedure should be followed in respect of all claims for Travel expenses
and LTC, depending upon the advance drawn and claim made directly without
drawing any advance.

V. Prepaid Expenses:

Under the accrual system of accounts, the expenses should be examined whether it
relates to a particular financial year or it covers a period beyond that financial year. In
the latter case, the expenses will be treated as ‘PREPAID’ only, if it pertains to a
period beyond three months at the end of the financial year and this amount exceeds
R. 3,000/- in individual cases.
 The following journal entry has to be made passed.

Specific expenses Account Dr.

3057 Prepaid Expenses Account Dr.
To Bank A/c Cr.

To account for the above prepaid expenses in the next year account, the following journal
entry has to be made.

Specific expenses account Dr.

3057 Prepaid Expenses Account Cr.

To make it clear, an example of motor vehicle tax payment is given below:

The M.V. Tax of Rs. 7,000/- paid covering the period of one year from October
99 to September 2000 will be booked in accounts as indicated below.

2070 Heavy Vehicle maintenance Account Dr. Rs.3500/-

(Concerned Department Code to be prefixed)

3057 Prepaid Expenses Account Dr. Rs. 3500/-

To Bank Account Cr. Rs.7000/-

In the next year, to account for the prepaid tax, the following journal entry has to
be made.

2070 Heavy Vehicle maintenance Account Dr. Rs.3500/-

3057 Prepaid Expenses Account Cr. Rs. 3500/-

Note: In the year in which the full payment of tax is paid, the prepaid expenses will be
exhibited under Assets, in the Balance Sheet. In the next year, it should be cleared by
booking as expenses EJV as mentioned above.

Similarly, for payments of bills relating to repairs and maintenance, electricity

consumption charges, telephone bills etc, EJV and BPV have to be prepared by booking
the expenditure to the relevant code Nos.

VI. Imprest Accounting:

1. Te imprest amount is otherwise known as ‘permanent advance’. Besides the

Commissioner in the central office, all subordinate officers like Municipal
Engineer, Health Officer, Medical officers of Dispensaries and Hospitals,
veterinary officer etc, are provided with the imprest to meet urgent day-to-day
expenses and they will get the imprest replenished periodically as soon as 50% of
the imprest amount is spent – by rendering accounts with supporting bills.
 2. The concerned officers will personally be responsible to account for the imprest
amount drawn by them. They should maintain imprest Recoupment Register to
account for the transactions by distinctly indicating the order and date of sanction,
amount sanctioned etc, for permanent reference. At the same time, the Accounts
cell will maintain Register of Imprest Paid as a permanent Record.
3. (i) When the imprest is paid to a subordinate officer, for the first time, a BPV is to
be prepared with copy of sanction order, signed by the officer authorized for this
purpose and sent to the Accounts Cell for making payment, by drawing cheque.

Then, an entry in the Register of Imprest should be made. All these amounts are
‘Assets’ only, in view of the fact that the money representing such imprest is held
by various offices instead of being kept in the Bank.

3058. General Imprest Account Dr.

To Bank Account Cr.

(ii) When imprest is replenished, after approving the Imprest Payment Voucher
bills etc. (For replenishment), a BPV and EJV are prepared

(a) The following journal entry is to be made in the EJV

Specific expenses account Dr.
4049. To Accounts Payable A/c – Expenses Cr.

(b) When the amount replenished is paid to the subordinate officer through BPV,
the following journal entry is to be passed.

4049 Accounts payable A/c – Expenses Dr.

To Bank Account Cr.

It is quite necessary that the sub-vouchers / bills met out of the sanctioned imprest
amount should be analysed with reference to the nature or kind of transactions and
entered in the EJV with their code Nos. A statement of claim for recoupment with an
abstract should be prepared and sent to the Accounts Cell along with the sub-vouchers /
bills as indicated below:

Statement of Claim for recoupment:

Sl. No. Sub-Voucher No. Nature of Transaction Amount Rs.

 Abstract:

2018 Stationery printing

2047 Postage and Telegram
2050 Repairs & Maintenance of Tools and Plant, etc.,

VII. TDS on Interest Earned out of CCD:

The Tamil Nadu Electricity Board collects convert Consumption Deposit (CCD) from its
High Tension Consumers 1.5 times of the Average Monthly Consumption during the
preceeding 12 Months. This Deposit is revised every year and Additional Deposit if
needed also collected along with the current consumption charges.

The Tamil Nadu Electricity Board pays interest at the prescribed rate (presently 5%) and
deduct Tax at source on this interest income at the rate prescribed by IT rules (presently
20%). However, the Local Body being a Local Govt. is exempted from the payment of
Income Tax under section 10 of the IT Act and ULB should prefer a reimbursement
claim to refund the Tax deducted by TNEB. The following are the journal entries for
Accounting this:

A) On receipt of intimation letter from TNEB

i) For adjusting the Interest Earned towards CCD
3056 – Deposits Recoverable A/c Dr.
1067 – Interest on Investments Cr.
( Being the net interest after deducting TDS
adjusted towards additional Deposit)

ii) 3056 Deposits recoverable A/c Dr.

3066/3123 To Bank Cr.

iii) 3074 – TDS Receivable from IT Dr.

1067 – Interest on Income Cr.

B) On receipt of refund order form IT Dept.

3066/3123 Bank A/c Dr.

3074 To Refund of TDS Cr.
(Being the refund received by cheque)
 CHAPTER – 06

SUPPLIERS / MATERIALS ACCOUNTING

Materials are generally purchased by calling tenders / quotations, depending upon

the value , the quantum of requirement and the need therefor. The accounting procedure
for security deposits and their refund / adjustment etc.is dealt with under “Deposits and
Advances Accounting”.

The Accounting system for receipt of materials, from the suppliers, should be as
follows :

After tenders or quotations received are finalized, a purchase order will be issued.
Based on this purchase order, supplies are made and accounted for.

(1) Inventory / Non – Inventory:

(a) The purchase of materials will come under two broad categories;
(i) Inventory items (Non-consumable)
(ii) Non-Inventory items (consumable)

However, while deciding the norms for determining the inventory and
non-inventory items, the nature of their utilities, the past consumption
pattern and the value of the items should be taken into account. Based on
these criteria, ABC analysis may be done for each item of stores, to
determine high value and high consumptions items.

‘A’ indicates all non-consumable items.

‘B’ indicates both non-consumable and consumable items.
‘C’ indicates only easily and quickly consumable items.

(b) All ‘A’ class items should be inventorised immediately on receipt. ‘B’
class items should be brought under the category of inventory items
depending upon their nature. All ‘C’ class items should be charged off as
expenditure on their purchase.

(c) In view of the above classifications, a more realistic inventory value will
be ascertained through accounts. Besides, the value of the materials will
be charged off to expenses, only on actual issue of materials. This system
will have a realistic expenditure status. So it is necessary to have a Priced
Stores Ledger to be maintained in the stores wing.
 (2) Priced Stores Ledger (MCF 26) – Receipts & Issues Accounting

All receipts should be accounted for, first, in Inventory Materials Receipt Note
(IMRN – MCF 27). Similarly all issues shall be made through the Inventory Materials
Indent and Issue Note (MCF 28).

In addition to these two main documents, the Stores Return Note (SRN – MCF 30),
Stores Adjustment Slip (SAS – MCF 31) etc should be prepared and accounted for
suitably updating the Stores Ledger. Stores Ledger for cement, steel and asphalt
should be maintained separately.

(3) Purchases of Materials against Advance Payment:

(1) In case of advance paid for supply of materials like purchase of medicines from
Tamil Nadu Medical Services Corporation (TNMSC) and Medical Stores
Department (MSD) and cement from TANCEM etc, the following accounting
entries have to be made.

3051. Advance to the Suppliers Dr.

To Bank Account Cr.
(By preparing BPV based on proforma invoice)

(2) After observing formalities as mentioned above, the following journal entry has to
be made when materials for the above advance are received.

3001. Specific Stock Account Dr.

3051. To Advance to the Suppliers Cr.
(By preparing purchase journal voucher)

(3) Whenever stock is issued through Inventory Material Indent and Issue Note, the
stock will be deducted. This will become a document for passing the following
journal entry (CJV).

3053. Materials Cost Recoverable Account Dr.

- Contractors
3001 To Specific Stock Account Cr.

The expenditure code No. should be noted against debit entry, if the stock is
issued for departmental execution of work (EJV).

(4) When the cost of materials is recovered from the contractor, who utilized them on
the work entrusted to him on contract, the following Journal entry should be
passed in the CJV.

3121/3122 Projects-in-progress A/.c Dr.

3053 – Materials cost Revocerable A/c – Contractors Cr.
 (To account for the cost of materials issued to the contractor and recovered from
his bill through CJV).

(4) Payment After Purchase:

(1) In cases, when purchases are made without making any advance payment, the
following journal entry will be made after observing all formalities.

Note: As a liability arises for the stock received, payment as to be made, for which a
Purchase Journal Voucher is to be prepared by debiting the stock account, and
crediting ‘Accounts Payavle account-Suppliers’.

3001 Specific Stock Account Dr.

4048 To Accounts payable A/c-Suppliers Cr.

(2) To clear the above liability, a BPV is to be prepared as follows:

4048 Accounts Payable Account – Suppliers Dr.
To Bank Account Cr.

(3) For materials issued for execution of work on contract, the journal entry will be
(CJV)

3053 Materials Cost Recoverable A/c – contractors Dr.

(name of the work to be specified)
3001 To Specific Stock A/c Cr.

(5) Non-Inventory items such as purchase of fodder, medicines, fuel to vehicles etc.

i) In respect of purchase of non-inventory consumable items, the

following journal entry has to be made after observing all formalities
for purchase.

Specific Expenses Account Dr.

4048 To Accounts Payable A/c – Suppliers Cr.
(By preparing PJV)

ii) For making payment, the entry in the BPV would be:
4048 Accounts payable Account – Suppliers Dr.
To Bank Account Cr.
 CHAPTER – 07

a) STORES ACCOUNTING

1. every Municipality should maintain a separate ‘stores’ under the direct control
and supervision of the designated official. In bigger local bodies like Municipal
Corporations, Special Grade / Selection Grade Municipalities, there is a need to
have a separate stores wing for Engineering. Water Supply, Public Health
Departments etc. with qualified and trained staff to man them A medical stores
may also be maintained if found necessary.

2. Activities:

The following activities are involved in the stores.

1. Invitation of tenders / quotations and finalisation

2. Issue of purchase order
3. Receipt of goods / materials from suppliers
4. Issue of materials on approved indents
5. Transfer from / return to stores
6. Stock adjustments
7. Scrap and unserviceable materials – collection and disposal
8. Physical Verification of Stock (periodical and surprise)
9. Asphalt and petrol purchase, issue and accounting

3. Stores Accounting System:

Basically, Stores accounting involves maintenance of ‘Quality Records’ and

‘Value Records’ i.e. Priced Stores Ledger in the stores. The stores should be
classified as Inventor and Non-Inventory items.

4. Maintenance of Records for Accounting in Stores:

(a) The following records are to be maintained in the stores;

1. Priced Stores Ledger.
2. Purchase Orders.
3. Inventory Materials Receipt note (IMRN).
4. Inventory Materials Indent and Issue Note.
5. Stores Return Note (SRN).
6. Stores Adjustment Slip (SRS).

Note: For Non-Inventory materials, the existing form of indent shall be used.
(b) The present system of finalizing tenders for supplying stores’
materials shall continue. In respect of stock, the store keeper will
prepare an Inventory material Receipt Note based on purchase
invoice and on actual receipt of stock, duly ensuring the
correctness of quantity, quality and rate and get it approved by
the authorized officer. He will also prepare a Purchase Journal
Voucher (PJV) and BPV duly signed by the authorized officer
supported by the purchase bill / invoice and IMRN and send
them to the Accounts cell for scrutiny and payment. The
Accounts cell shall ensure that the following documents are
available before passing for payment.

I. Suppliers Bill / Invoice

II. I.M.R.N.
III. P.J.V.
IV. B.P.V and
V. File

(c) The Accounts Cell shall pass the claim for payment and issue
cheque after scrutiny. The Journal entry in the PJV and the entry
in the BPV will be as follows:

In the PJV
3001 Specific Stock account Dr
4048 To Accounts payable A/C – Suppliers Cr

In the BPV
4048 Accounts payable A/C – Suppliers Dr
To Bank Account Cr

(d) In case advance, if any, was paid to the supplier and the same is
adjusted now in this bill, the procedure to be followed is already
prescribed under the chapter on “Suppliers / Materials
Accounting”. The same are reproduced here for easy reference.

Journal Entries:

i. For adjusting advance;

3001 Specific Stock Account Dr
3051 To Advance to the Suppliers A/C Cr
4048 To Accounts Payable A/C-Suppliers Cr

ii For paying the net amount after adjustment of advance;

4048 Accounts Payable A/C – Suppliers Dr
To Bank A/C Cr
 (e) The above system should be followed for the transactions under
all funds with appropriate prefix.

5. Maintenance of Priced Stores Ledger (MCF 26):

(1) In this accounting system, the maintenance of Priced Stores

Ledger is necessary. So, all materials received should be priced. In other
words, issue prices for all materials issued from the stores should be fixed
by adopting norms as mentioned below in respect of cement and steel and
all other items of stock.

1. Cost price as per Supplier’s bill / Invoice

2. Transport Charges.
3. Unloading Charges.
4. Godown rent if any
5. Incidental Charges, and
6. Margin at Specified rate

(2) (a) As soon as the “issue price” is approved by the appropriate

authority, this issue price should be noted at the top of each folio (meant for
each material) of the priced stores ledger. This issue price should be adopted
when the material is issued through Inventory material issue note and the
stock announced for.

(b) At the time of issue to the contractor, the following journal entry is to be
passed.

3053 – Materials Cost recoverable A/C – Contractor Dr

3001 - Specific stock A/C Cr
1045 – Other Income Cr

(Being the materials issued to the work “……….(Name of the work)” giving
reference to project code No.)

(c) When the work is in progress and part payment is made to the
Contactors or / and when the work is completed and final payment is
made, the cost is recoverable through the CJV. The following accounting
entry is to be passed.

3121 / 3122 – Projects in-progress A/c Dr.

3053 Materials Cost Recoverable A/c – Contractors Cr.
4016 Additional Tender Deposit – Contractors Cr.
4035 Income Tax – Deductions – Contractors Cr.
4047 Accounts Payable A/c Contractors Cr.
 (Being the payment made to the Contractor after effecting recoveries from
the Contract Bill).

(d) When the Contractor is paid by a cheque, the following entry should be
made in the BPV.

4047 Accounts Payable – Contractors

To Bank A/c Dr.
(Being the net amount paid to the Contractors) Cr.

(3) FIFO Method for Issue of materials:

The FIFO (First in – First Out) method should be followed for issue of
materials and for accounting them. It is explained below:

(a) In this method, the first consignment of materials received, is the first
to be issued. The items on the debit side of the stores account are to be
exhausted in the chronological order. Similarly, the price fixed for a
particular consignment, will be charged till the stocks covered by that
consignment is over, and even in cases, where the stock covered by the
purchase, is available with difference in cost, the issue price as fixed
therefore, will be charged, relevant to the stock covered in the issue of
materials.
(b) An example is given below, to prepare Priced Stores Ledger:
2nd Jan Purchase 300 units @ Rs. 3/- per unit
4th Jan Purchase 600 units @ Rs. 4/- per unit
th
6 Jan Issued 500 units
10th Jan Purchase 700 units @ Rs. 4/- per unit
th
18 Jan Issued 800 units
20th Jan Purchase 300 units @ Rs. 5/- per unit
rd
23 Jan Issued 100 units

Entries in the Priced Stores Ledger

Receipts Issues Balance

Date IMRN Qty Rate Value IMIN Qty Rate Value Total Qty Rate Value Total
units Rs. Rs. Units Rs. Rs. Units Rs. Rs. value
Jan2 300 3 900 300 3 900
Jan4 600 4 2400 300 3 900
600 4 2400 330
Jan6 300 3 900 1700 400 4 1600 1600
200 4 800
Jan10 700 4 2800 1100 4 4400 4400
Jan18 800 4 3200 3200 300 4 1200
Jan20 300 5 1500 300 4 1200
300 5 1500 2700
Jan23 100 4 4400 400 200 4 800
300 5 1500 2300
6. Issue of Materials:

(i) (a) In respect of materials issued to the contractors, departmentally for execution of
various works, there should be a provision in the Tender Schedule for supply of materials
at specified rates. The recovery is to be made only on that rates, irrespective of stores
issue rates.
(b) However, where a contingency has arises for the supply of materials
departmentally during execution even in the absence of provision for supply of materials
in the tender, then the recovery should be made either at the market rates or stores issue
rates or the rates noted in the data for the work, whichever is higher.

(ii) As and when the materials are issued from the stores, entries have to be made in the
Inventory Material Indent and Issue Notes and in the Priced Stores Ledger by the Store
Keeper duly approved by the authorised officer. The second copy of the Issue Note shall
be sent to the Accounts Cell, by the Engineering Branch along with the CJV for giving
effect to, the issues, in accounting with reference to the issues made to the contractors.

The following journal entry will be passed:

3053 Materials Cost Recoverable A/c – Contractors Dr.

3001 To Specific Stock A/c Cr.

For payments made to the contractors for execution of different works, the Contractors
Ledger will continue to be maintained in the Engineering Department.

(iii) On receipt, the Accounts cell will give effect to the CJV in accounting.

(iv) When the balance of materials, if any, is returned out of materials already issued to a
contractor for a specific work, through ‘Stores Return Note’ (SRN) prepared and
approved by the authorised officer, such materials will be received in stores by the store-
keeper, who will account for their receipt in Priced Stores Ledger. He will send the
second copy of the SRN through the Engineering branch along with CJV duly signed by
the Engineer to the Accounts Cell for accounting as follows.

3001 Specific Stock Account Dr.

2020 Other Expenses A/c Dr.
3053 To Materials Cost Recoverable A/c – Contractors Cr.

Note: The difference between the issue rate and the cost price already taken to the other
income to the extent of issues made, is not reversed by charging to ‘other expenses’, to
the extent of materials received back to stores.

(v) Wherever the materials are agreed to be supplied departmentally through stores at the
agreement rates, irrespective of the stores issue prices, the difference, if any, between the
stores issue prices (invariably the agreement rates will be lesser than the stores issue
prices0 and the agreement rates may be worked out and charged to the respective work
by means of a CJV as indicated below:

Specific Expenditure head of account Dr.

3053 Materials Cost – Recoverable A/c – Contractors Cr.

7. Accounting of materials for departmental execution of work:

(a) Here, the materials are issued to the Engineering staff on specific works based on
approved estimates. As a result, the cost of the materials issued, is charged to the
works directly, So, based on the approved Inventory Materials Indent (IMI),
Inventory Materials Issue Note (IMIN) should be prepared by the Store-Keeper
along with the EJV, duly making entry in the Priced Stores Ledger and forwarded
to the Accounts cell.
(b) On receipt, the Accounts cell shall pass the following journal entry after scrutiny
Specific Head of A/c – Nature of work Dr.
3001. To Specific Stock Account Cr.
(c) In case of return of materials if any, from the specified work, a reverse entry is to
be made with supporting documents both in the stores and the Accounts cell by
following the usual procedure i.e. by preparing EJV.

8. Issue of Materials to other Institutions:

At times, requests from other municipalities for issue of materials like cement, steel etc.,
on loan basis will be received,. Generally such issues on loan basis should not be
entertained. In exceptional circumstances, the material should be issued on payment of
cost only, if the situation permits such a course of action. As cash or cheque is received
towards the cost of the material issue, a BRV is to be prepared and the amount accounted
for in the Receipts book. The entry will be:

Bank A/c Dr.

3001 – Specific Stock A/c Cr.

9. Stores Adjustment Slip (SAS) (MCF 32):

(a) This should be prepared when;

i. The quantity as per physical verification
differs from the figure indicated in the priced stores ledger
ii. Evaporation / shrinkage occurs owing to
intrinsic characteristics of the material and
iii. Material substituted on issue, resulting in wrong postings in the
pried stores ledger.

(b) Besides, as a result of periodical physical stock verification, there may be excess
or shortage in quantity. There may be cases of pilferage, theft or loss due to
 natural calamity. In all the above contingencies, besides taking administrative
action to regularize the shortage arising out of them on proper investigation, the
following accounting procedure is to be followed.
(c) In respect of excess found in quantity, it should be added to the stock with
specific endorsement as ‘Excess found during physical verification’ in the stores
Ledger.
(d) The shortage etc should be treated as ‘loss’ where specific recovery orders are
passed fixing up responsibility as a result of departmental action, the amount
covered by such recovery orders should be taken as other income (1045).

The following journal entries have to be passed;

(i) For shortages:
2091 Stores Written off A/c Dr.
3001 To Specific Stock A/c Cr.

(ii) For Excess:

3001 Specific Stock A/c Dr.
1045 To Other Income A/c Cr.

(iii) For Recoveries by fixing up responsibilities for regularization of

shortages in Stock:
3072 Miscellaneous Recoveries Receivable A/c Dr.
1045 To Other Income Account Cr.

(iv) For recoveries through remittance chalan:

Bank Account Dr.
1045 To Other Income Account Cr.

(v) For Recoveries through pay bills in lumpsum or in instalments:

4046 Accounts Payable A/c – Staff Dr.
3072 To Miscellaneous Recoveries – Receivable A/c Cr.

10. Scrap and old / Unserviceable / Condemned items of stores – Disposal:

The value of the scrap and other old, unserviceable / condemned articles have to be
ascertained and orders obtained to write them off, from the respective Tools & Plant
Register and Asset Register. The journal entry to be passed this regard is:

2091 Stores Written off A/c Dr.

3001 To Specific Stock A/c Cr.

Then these items have to be entered in a register called ‘Unserviceable Stock Register
(MCF 35)’ They should be sold in time in public auction after observing the usual
formalities.
The entry to be passed is given below’
Bank A/c Dr.
1045 To Other Income A/c Cr.
(Basis: Remittance chalan and BRV)

11. Verification of Stock:

(a) In order to ensure that the priced stores ledger is properly maintained and the
stocks are issued on approved indents based on actual requirements, supported by
prescribed records, the Commissioner shall arrange for periodical surprise
physical verification of the stores by an officer nominated by him, independent of
the officer in chare of stores and take appropriate action required therefore.
(b) The annual stock verification of the stocks as on 31st March physically, by
nominating an officer of the municipality should be arranged by the
Commissioner to ensure that the are no discrepancies. Appropriate action should
be immediately taken on receipt of the physical verification (PV) reports.

Note: The guidelines on Inventory Valuation, as prescribed by the revised Accounting

Standard (AS-2), included in Appendix – I to this Manual shall be followed, for
issuance of materials.

(b) ASPHALT ACCOUNTING

1. Asphalt is an important material required for common and frequent use in the
Engineering Department. This is purchased in bulk on payment of full cost in advance,
based on the proforma Invoice from Indian Oil Corporation / Hindustan Petroleum /
Bharat Petroleum. The payment is made by means of cheque or DD towards the cost of
bitumen.

2. For transporting bitumen, (asphalt) tender is settled and payment is made as and when
consignment of stock is received. So, in this case, the cost of bitumen and transport
charges are involved. As the procurement itself is of a capital nature, this has to be
accounted for under Capital Fund.

3. To fix the price, the following elements have to be taken into account.

i. Cost price as per suppliers’ Invoice

ii. Transport chares as per contractors’s bill
iii. Unloading charges
iv. Godown rent, if any
v. Incidental charges and
Margins to cover handling and overhead charges

4. The purchased quantity should be brought to stock in the Priced Stores Ledger
maintained both in quantity and value by the Store-Keeper. He should immediately take
action to get the approval of the appropriate authority for fixing the ‘issue price’ through
the Accounts Cell and this issue price should be predominantly indicated in Red Ink, to
ensure the correctness of subsequent recovery made in the contractor’s bills.

5. To account for purchase, receipt and issue of this item, the following journal entries are
to be passed.

Description of Activity Journal Entry Documents to be

i. Advance paid to the 3051. Advance to the Proforma invoice of the
supplier
ii. On receipt of supply
iii. For payment of transport 3001 Bitumen Stock
charges
iv. Entry for Issue price
v. Issue to contractors
(1) For Capital work
(2) For Repairs and 3053. Materials cost
maintenance work
Prepared and enclosed
suppliers – (Bitumen) Dr. Company and BPV
To Bank A/c Cr.
3001 Bitumen Suppliers’ bill / Invoice,
Stock A/ Dr. Inventory Material Receipt
3051. To Advance to the Note and PJV
suppliers – (bitumen) Cr.
Transport contractors’ bill,
A/c - Dr. Inventory Material Receipt
4047 To Accounts Note, PJV and BPV for
payable A/c – payment to the transport
Contractors Cr. contractor
4047. Accounts payable Dr.
To Bank A/c Cr.
3053 – Materials Cost A CJV should be prepared
Recoverable A/c – and this entry should be
Contractors passed when the
(Cost Price) Dr. Contractors A/c is debited
3001 Specific Stock A/c
(Cost Price) Cr.
3053 – Materials Cost
Recoverable A/c –
Contractors
(Difference between Cost
price & Issue Price) Dr.
1045 To Other Income Cr.
3053. Materials cost Contract bill, M.Book, File,
Recoverable A/c – Inventory Material Issue
Contractors Note (IMIN) and CJV
(Name of the Work) Dr.
3001 to Bitumen
Stock A/c Cr.
Contract bill, M.Book, File,
Recoverable A/c IMIN, CJV and recovery
- (Name of the work) Dr. statement must be prepared
3001 Bitumen stock A/c Cr. and used
 Description of Activity
(vi) When payment made
(a) Capital Work
(b) Repairs and
Maintenance Work
Journal Entry Documents to be prepared
and enclosed
By CJV B.P.V. for recovery of cost
3121/3122 Projects in of bitumen issued for work
Progress A/c Dr. and payment to contractor
3053 Materials Cost and for recovery of I.T.,
Recoverable A/c – hire charges for Roller from
Contractors Cr. the contract bill.
(Name of the work)
4035. To I.T. Deductions
A/c- Contractors Cr.
1058. To Hire charges Cr.
(Road Rollers etc)
4047 Accounts payable
A/c Cr.
- (Contractors)
BY BPV
4047 Accounts
Payable A/c Dr.
- (Contractors)
To Bank A/c Cr
BY CJV BPV for recovery of cost of
(Specify Code no.) bitumen issued for the work
Maintenance Work Dr. and payment to the
3053 Material Cost contractor and for recovery
Recoverable A/c of T.D.S. hire charges from
- Contractors Cr. the contract bill.
4035 I.T. Deduction
- Contractors Cr.
1058 Hire Charges Cr.
4047 Accounts Payable
A/c – Contractor Cr.

BY BPV
4047 Accounts payable
A/c Contractor Dr.
To Bank A/c Cr.

(c) PETROL / DIESEL ACCOUNTING

1. In some of the Municipalities, in order to cater to the daily needs of the vehicles
maintained by them, Petrol / Diesel pumps are installed, Petrol / Diesel purchased and
issued to the vehicles and accounts maintained on prescribed lines. This is a non-
inventory item. Generally, the accounting procedure for purchase and issue of Asphalt
would apply to this item also. The following Journal entries will be made, when petrol /
diesel is received in the tanker.
(1) 3001 Stock Account – Petrol / Diesel Dr.
4048. To Accounts payable A/c – Suppliers’ Cr.
(By PJV)
(2) 4048. Accounts payable A/c – Suppliers Dr.
To Bank Account Cr.
(By BPV)

Accounting under various Account Heads:

(3) Specific Expenses A/c Dr.

(User – department)
3001 To Stock Account – Petrol / Diesel Cr.

2. At the end of every month, the collected indents based on which issues were made,
should be sorted out and abstract of issues, date wise and user – department wise
prepared. A EJV should then, be prepared for each department by enclosing the abstract
with the receipted indents (through which issues were already made) and forwarded to
the officials under whose control, the vehicles are placed for the discharge of official
duties. This should be checked with reference to the entries made in the Log Books of the
vehicles. On check, the EJV should be approved and sent back to the Store-Keeper.

3. The Store-Keeper, after ensuring that all such EJV’s with abstracts and receipted
indents forwarded to the respective user – departments are received back, will send them
in complete shape to the Accounts cell for accounting under proper expenses accounts,
after scrutiny.

4. This exercise should be made by the Store Keeper every month by proper maintenance
of stock account for receipts and issues, subject to periodical physical verification of
stock on hand so that the cost of consumption of petrol / Diesel in a month is accounted
for under the relevant expenses account.

4. Loss on account of evaporation:

(a) The Commissioner should arrange for verification of stock of Petrol / Diesel in
the tank on quarterly basis and also when occasion demands. There is bound to be
some difference between the book balance and the ground balance. The difference
should be ascertained and recorded by the Verification Officer over his dated
signature with the designation of the post held by him. The verification officer
should send a note on the difference to the officer incharge of the Petrol / Diesel
Bunk and having control over the store-keeper with a copy to the Accounts Cell.
(b) On receipt, the controlling officer should arrange to analyse the quantity in
difference and the admissibility for evaporation and find out whether there was
any case of abnormal difference that was rendered possible by theft, pilferage etc.
If the evaporation is found to be normal i.e. within the prescribed admissible
percentage, he should propose adjustment through EJV to the Accounts Cell by
issuing a regularisation order.
 The journal entry for this would be ;

2092 Petrol / Diesel Evaporation A/c Dr.

3001. To Stock A/c – (Petrol / Diesel) Cr.

(c) If the evaporation is beyond the admissible limit, necessary investigation has to be
initiated and departmental action taken to regularize the difference in value, above
evaporation limit. When orders are passed by fixing responsibility for recovery of
the value, the following journal entries are to be passed in accounts.

5. (i) For regularization of Difference within and above evaporation limit:

In the EJV

(a) 2092. Petrol / Diesel Evaporation A/c Dr.

(within permissible limit)
2091. Stores written off A/c Dr.
(beyond permissible limit)
3001 To stock A/c – Petrol / Diesel Cr.
3072. Miscellaneous Recoveries Receivable A/c Dr.
1045. To other Income A/c Cr.

(For making entry on issue of orders for recovery by fixing up responsibility for the
difference beyond evaporation limit)

In the BPV

(b) Bank Account Dr.

3072. To Miscellaneous Recoveries Receivable A/c Cr.
(For remittance of the amount through chalan)

(c) 2001 – 2011. Salaries Account Dr.

3072. To Miscellaneous Recoveries Receivable A/c Cr.
(For recoveries through pay bills in lumpsum or in instalments)

CHAPTER – 08
CONTRACTORS’ ACCOUNTING

(1) All civil works are executed only through contracts. The finalisation of tenders for a
work is attended to, by the Engineering Department.

(2) The initial transactions like remittance of deposits, refund to the unsuccessful
tenderers, etc., though form part of this accounting are dealt with in the chapter on
‘Deposits and Advances Accounting’. The Accounting system for both Capital and
Revenue funds is one and the same except that capital items of work are assetised /
capitalized.
(3) The contractors are paid through part bills during the progress of the work, depending
on the stages of execution and also on agreement conditions and final bills, when the
works are completed in all respects.

(4) There is no change in the system or procedure, now being obtained in regard to
acceptance of tenders, recording measurements, supply of materials, maintenance of
Contractors’ Ledger, recovery towards materials from the contractor’s bills etc. except
those that are mentioned below, to suit this system of accounting.

(5) The documents that have to accompany the part /final bills, both under Capital and
Revenue Funds, are given below:
1. Contract Bill (MCF 21)
2. Measurement Book
3. Recovery statement
4. Completion Report
5. CJV in duplicate
6. BPV in duplicate

(6) Documents to be used:

1. Contractors’ Ledger
2. Material Indents and Issue Notes
3. Stores Return Notes
4. M.Book
5. Stock Book for materials where there is no separate ‘store’ and no priced stores
ledger is maintained.
6. Advance Recoverable Register for advance, if any, paid to the contractor

(7) The procedure already prescribed for checking the contract certificate with reference
to M.Book, agreement etc. by the Engineering Department shall continue.

(8) (a) The Accounts Cell should ensure the correctness of the claim with reference to
tendered rates and agreement as well as recoveries towards cost of materials issued from
the stores, hire chares for Road-Roller, Tools & plant etc., recovery of advance if any
paid, collection of retention money, Income Tax due etc. The claim should be
accompanied by Contractor’s Journal Voucher (CJV) and Bank Payment (BPV). It must
also be ensured that the Account codes, Project codes etc. have been correctly indicated
both in the contract bill and CJV.

(b) Besides, the Accounts cell should ensure that the contribution due (at present
0.3% of the total value of the estimated civil work) with reference to G.O. Ms. No. 222
Labour and Employment dated 1.11.94, G..O.Ms. No. 80 Labour and Employment dt.
5.6.97 and and G.O.Ms. No. 95 Labour and Employment dated 2.7.97 is collected based
on the total estimated cost of each civil work by D.D. in advance, i.e. at the time of issue
of work order itself and forwarded to the ‘Manual Workers General Welfare Fund’
maintained by the Tamilnadu Labour Welfare Board.
 (d) (i) The journal entries involved in the transactions are as follows: either at the
time of part performance (i.e. first and part contract bill) or at the time of
completion (final contract bill with completion report approved by the Municipal
Enineer0

3121 / 3122 Projects in progress A/c Dr.

3053 To Materials cost Recoverable A/c – Contractors Cr.
1058.To Hire charges Cr.
1045. To Other Income – Fine Cr.
4035.To Income Tax Deductions – contractors (TDS) Cr.
4016 To Tender Deposit – contractors (Retention Money) Cr.
3052. To Advance to the Contractors (adjustment of advance) Cr.
4047. To Accounts payable A/c – contractors Cr.

(ii) For net amount payable to the contractor : by BPV

4047. Accounts payable A/c – Contractors Dr.

To Bank A/c Cr.

(iii) For remitting Income Tax deducted; by BPV

4035 Income Tax Deductions A/c – contractors Dr.

To Bank A/c Cr.

(9) As regards the works for which the payments are made and which are treated as
‘capital’ and those that are to be assetised / capitalized, the accounting system is
prescribed under chapter on ‘Projects & Fixed Assets Accounting’.
 CHAPTER – 09

PROJECTS AND FIXED ASSETS ACCOUNTING

1. The terms ‘Expenditure – ordinary’ and ‘Expenditure – capital’ are often used in all
Accounting Manuals. But the term ‘Expenditure – capital’ though properly understood, is
not followed in the strict accounting sense. The double entry accounting is basically
aimed at ascertaining ‘the amount recoverable’ and the Assets Created out of capital
expenditure. So, the Assets are created by spending on projects. On completion of the
projects and on adding other expenditure directly connected with them such as
advertisement charges, expenditure on inaugural functions etc. and certain others, at the
prescribed percentages, these projects are brought under ‘Fixed Assets’.

2. ‘Capital Expenditure’ refers to the expenditure that results in,

(a) acquiring Assets of permanent nature,
(b) extending or improving the existing assets, and
(c) enhancing the value or life of an existing asset.

3. The following procedure is to be followed in this regard,

1) The estimate for a project should be prepared in a manner by which the class
and sub-class of the Asset to be created by the project can be identified at the
initial stage itself i.e. at the estimate preparation stage itself.

2) Projects Ledger (MCF 32) for all capital works is to be maintained by the
Engineering Branch.

3) Supervision charges and departmental labour, if any, used on the various

projects executed at a time, should be appointed by the prescribed formula, at the
end of each financial year by preparing work sheet, till the projects are completed
and assetised / capitalized.

4) Interest charges payable on loans through which projects are executed have to
be added to the cost of projects annually during ‘execution period’ by preparing
work sheet till the completed and assetised / capitalized.

5) In the case of ‘Bought our Assets’ i.e. assets purchased in a form of condition
ready for use (Furniture, Vehicles, Machineries etc), the price including taxes,
excise duty, transport charges, if any, installation charges and incidentals in
connection with the proper functioning should be capitalized.

Examples:
 (i) Land purchased in a low lying area:

All expenditure incurred in filling up the land, leveling etc. should be added to the cost of
land and capitalized.

(ii) Purchase of Machinery:

Besides the cost paid on purchase, installation charges, freight, testing chares etc. paid to
outside agencies other than the dealer from whom it was purchased, should be added and
the whole expenditure capitalized.

(7) All purchase of assets of individual nature whose value is less than Rs. 1000/- each,
need not be capitalized. Only quantitative records are to be maintained for them i.e. they
should be entered in the Tools and Plant Register.

(8) Expenditure on major repairs and maintenance of a particular item of asset should be
capitalized, if such expenditure exceeds 10% of the cost of the asset and / or more than
Rs. 10,000/-. If it is less, the expenditure can be treated as ‘Revenue Expenditure’ under
Revenue Fund.

The ceiling indicator is only nominal in nature. In real condition, the repairs and
maintenance cost may be more depending on the gravity and necessity of repairs to be
carried out, with reference to wear and tear requirement condition, to make or keep the
asset in good condition. If the repairs carried out are purely of maintenance nature,
making it not improving its worthiness nor increasing the use of its life, the expenditure
on such repairs should be treated as maintenance, irrespective of the amount involved.

(9) Additions made to a particular item of asset should be treated as a separate item of
Capital Expenditure and added to the Asset concerned.

(10) The fixed asset value should be reflected in the books of accounts and in the Asset
Register (MCF 24) at the Original Cost.

(11) All assets are to be identified by ‘Identification Numbers’ so that they can be easily
known by any one incharge of execution and accounting.

(12) Capitalisation of assets created in a big project, should be done as and when a
particular component is completed, even though the project as a whole is not completed
and still in progress.

4. Accounting for Bought out Assets:

(i) (a) Assets purchased as a part of the project, for example: purchase of land for
construction of building, the journal entries will be:
 3121 / 3122. Projects – in – progess A/c Dr.
4047. To Accounts Payable A/c – Land Owners Cr.
(EJV is prepared)
4047. Accounts payable A/c – Land Owners Dr.
To bank Account Cr.
(BPV is prepared & cheque issued)

Relevant Asset A/c (Land) Dr.

3121 – 3122. To Projects – in – progress A/c Cr.
(By FAJV)

(ii) When bought out assets are purchased for specific purpose, for example:
purchase of a vehicle for a department, the journal entry will be;
Relevant Asset A/c Dr.
4048. To Accounts Payable A/c Suppliers Cr.
(By FAJV)
4048. Accounts payable A/c Suppliers Dr.
To Bank Account Cr.
(By BPV)

5. Maintenance of Projects Ledger (MCF 32):

(a) The Engineering Branch should maintain the Projects Ledger and allocate a
folio for each project.
(b) The following particulars are to be entered;

(i) Project code and description

(ii) Mode of financing
(iii) Estimate / sanction reference
(iv) Department involved in executing the project.

6. (a) The following code numbers should be used for the modes of financing (source of
finance) as indicated against each.

Code No. Source of Financing

01 Government Loans
02 Loans & Grants (Project partly by loan & partly by grant)
03 Grant (Fully financed by Government)
04 Revenue Fund
05 M.U.D.F.
06 TUFIDCO Loan
07 Partly loan and partly revenue fund (e.g. Mega City)
08 M.P. Fund
09 M.L.A. Fund
10 Here, enter the name of the financial institution. The same should
be continued for ever.
If found necessary, more code numbers can be used against each of the Financial
Institutions.

(b) The Project should be identified easily.

For example, Project No.01-72-98 indicates the following details:

01 - Government Loan (Source of Finance)

02 - Serial No. in the Projects Ledger (Project Code No.)
03 - Year of the Project, i.e. year in which it is commenced

7. Accounting of Assets created by completing the Projects:

(a) Every capital work (Project) that is completed in all respects, shall be assetised /
capitalized and brought to the Asset Register (MCF 24). While capitalizing a project, the
elements of ‘indirect cost’ viz. Project overhead appropriation – Expenses and project
Over head appropriation – interest (if it is completed out of the loan received) should be
taken into account.

(b) The following accounting treatment is involved.

(i) When final payment is made to the Contractor, on completion of a Project, in addition
to the CJV, another Journal Voucher – Fixed Asset Journal Voucher – has to be prepared,
supported by the completion report with the following entries therefor.

Specific Asset A/c Dr

3121/3122 Projects – in – progress A/c Cr
(Value of the work done)
1069 To Projects overhead appropriation Cr
- Expenses A/c

(To cover the prescribed percentage on the value of the work done towards the
supervision charges, advertisement charges, expenditure on foundation stone laying
ceremony, inaugural function (Opening Ceremony) etc)

(ii) 3048 To Wages of Technical Assistant Cr.

1070 Projects – Overhead appropriation – Interest-A/c Cr.

(In case the work was executed with loan, the interest calculated at the prescribed
percentage on the value of the work done, as explained in Code No. 1070 in the manual
Volume – II)

(c) The entries in the Asset Register should be made with reference to the FAJV prepared
as above, with the description of the Asset created and its value, and they should be
attested by the Municipal Engineer.
(d) Maintenance of Asset (Fixed) Register:

All the assets that are in existence as on 31st March i.e. before switching over to the
accrual system of accounting, namely, land, buildings, bridges, culverts, roads, storm
water drains, including open drains, over head tanks, pumping stations, water mains,
furnitures, fixtures and machineries etc., have to be brought to the Asset Register (MCF
24) category wise, as opening entries with their depreciated value with reference to
periods of construction, formation of roads at prescribed percentage based on their life
period.

All Assets created on and from 1.4.1999 have to be entered in the Asset Register at the
original cost as ar5rived at in the Fixed Asset Journal Voucher and the original cost will
remain as such in the register.

The periodical depreciation with reference to prescribed percentage of individual asset

taking its period of life will be worked out in the depreciation worksheet (MCF 37) every
year, till its value is brought to minimum of Re.1/-

For purpose of revaluation, the value of individual assets will be taken as Re.1/-

Entries in the Asset Register have to be made by setting apart sufficient pages for each
category of asset, so that any addition or improvement or deletion can be accommodated
beneath the concerned asset.

8. Execution of Projects by other agencies on Deposit work system:

There are projects that are executed out of the Loans/Grants received from the Govt. by
entrusting the work to other agencies like P.W.D. Highways, T.N. Construction
Corporation and TWAD Board.

In some cases, orders are issued to the effect that the Loans/Grants sanctioned are directly
placed at the disposal of the executing agency, without first the Loans/Grants being
credited to the Municipal account and then the payment being made to the executing
agency. The works are called ‘Deposit Works’. The transactions therefor should be
accommodated under Capital Fund.

The accounting system involved is as indicated below:

(1) When the Loan/grant actually received and then payment made.

(a). For receipt of Loan/Grant

Bank Account Dr
4004/4013 To Laon/Grant from Govt. Cr

(b) (i) For payment to the executing agency

 3125 Advance to PWD/Highways etc., Dr
(or)
3131 Advance to TWAD Board Dr
To Bank Account Cr

(ii) When the Laon/Grant received by book adjustments only and not by cash,
a E.J.V. is to be prepared

3125 Advance to PWD/Highways etc Dr

(or)
3131 Advance to TWAD Board Dr
4004/4013 To Loan/Grant Cr

In both the above cases, necessaries entries in the Loan Ledger, Loan Appropriation
Register and Grants Appropriation Register should be made simultaneously to watch the
eventual completion of the Projects and to obtain the statements of expenditure
periodically, from the executing agencies till the Projects are completed, assetised and
handed over.

Based on the periodical statements of expenditure received, from the executing agencies,
the following journal entries have to be made in the accounts:
3121/3122 Projects - in – progress A/c Dr
3125 To Advance to PWD, Highways etc., Cr.
3131 To Advance to TWAD Board Cr.

On receipt of Completion Reports and handing over possession

Relevant Assets Account Dr

3121/3122 To Projects-in-Progress A/c Cr.

9. Accounting for Retirement of Assets:

The word ‘Retirement’ with regard to assets, indicates the withdrawal of Asset from actie
use because it has become obsolete, unserviceable or irrepairable. So it has retired from
being useful for the user. The retired Asset is disposed off, as SCRAP.

(a) To account for retirement of Asset, the following journal entry is to be passed;

2037 Loss on sale of Fixed Asset A/c Dr.

4065-4071. Accumulated Depreciation A/c Dr.
To Relevant Asset Account Cr.
(at original cost) (By EJV)

(b) To account for realization of cash received on sale of assets either by auction
or tender, the following journal entries are to be made;
Bank Acccount Dr.
 (Revenue Fund)
1045 To Other Income Cr.
(By BRV)

10. Depreciation:

(i) The life of Assets and the rates of depreciation on them are adopted as given in Tables
A and B below, based on their being adopted in the State Govt. Departments and public
sector undertakings.

(ii) Sop far as Assets, other than those falling under Water Supply and Drainage Fund
Account are concerned, ‘The written Down Value Method’, otherwise called the
‘Diminishing Balance Method’ is followed.

(iii) In respect of some of the assets under Water Supply and Drainage Fund Account,
that are special to this Fund, the Straight Line Method is followed.

(iv) Both the methods are explained below:

(a) Written Down Value Method:

Under this method, the rates of depreciation will be applicable at a fixed percentage on
the diminishing balance value of the Asset each year. In other words, the percentage of
depreciation is calculated on the balance value of the Asset brought forward from year to
year.

(b) Straight Line Method:

Under this method, the rates of depreciation will be applied at a fixed percentage on the
original cost of the Asset at the end of the year.

(v) In both the methods, the original cost of the Assets will be retained in the Asset
Register (MCF 24)

(vi) The depreciation so worked out every year, in the depreciation work sheet prescribed
(MCF 35), will be brought to ‘Accumulated Depreciation Account’ under the Liabilities
side of the Balance Sheet.

(vii) The Assets that are purchased or acquired in a year are provided depreciation as
indicated below:

(a) No depreciation is chargeable if the Asset is purchased or acquired in the last month,
i.e. March of the financial year.
(b) If the period of purchase or acquisition is less than 6 months (i.e. purchased in the
month October-February) in the financial year, the rate of depreciation, should be applied
for the half year in the financial year.
(c) If the above period exceeds six months in the financial year (i.e. purchased in the
months April-September), the rate of depreciation should be applied for the whole year.

(viii) If the Asset is in existence and used beyond the period of its life, then the Asset
should be valued at Re. 1/-

TABLE A
Rates of Depreciation to be adopted – on the life of Assets under the ‘Written Down
Value Method’

Sl. Description of Details of Assets that are to be Estimated Percentage

No. Assets included Life of Depr.
01 Land Parks, Burial Grounds, Play - No
grounds and any vacant site on Depreciation
which no construction available on Lands
and kept as vacant site. This
includes the open space donated
by the layout promoters, to the
council by transfer deeds.
02 Building-Class I Office buildings, School 50 years 5
Civil Structures buildings, Public conveniences,
Hospitals, Dispensaries, Clinics,
Maternity & Child Welfare
centers, Swimming pool, Market
places, Slaughter houses, Dhobi
khanas, Creches, Lethal
chamber, Stadia, Shopping
complexes, Zoo, Bus stand, T.B.
/ I.B, Town hall, Community
hall, Lodging houses, Cinema
theatre, Staff quarters etc
03 Building-class-II Nutritious meal centers, 15 years 18
Civil Structures Compound walls
04 Subways and Cause ways, vehicular subways, 15 years 18
Cause ways pedestrian over bridges
05 Bridges and Bridges and Flyovers 40 years 7
Flyovers
06 Storm water Storm water Drains – open 15 years 18
Drains-open Drains & Culverts
Drains &
Culverts
07 Heavy Vehicles Lorry, Tractor, Bulldozer, 10 years 25
Mechanical Sweeper, Tipper,
 Loader, Bus, Road roller etc
08 Light Vehicles Jeeps, Cars, Power Tillers, 10 years 25
Motorcycles, Mini lorry,
Autorickshaw etc
09 Other Vehicles Single driven RC, Double Driven 5 years 50
RC, Bicycles, Cart etc (RC-
Rubbish cart)
10 Furniture, Steel chairs, Steel Tables, 10 years 25
Fixtures, Office Wooden chairs, Wooden tables,
Equipments etc Steel racks, Wooden racks, Steel
cupboards, Typewriters,
Duplicators, Xerox machines,
Communication Equipments,
Calculators, Air conditioners,
Water coolers, Refrigerators,
Fans, Electrical fittings. Other
Office equipments (e.g. Bradma
Registrex) Radios, TVs, Stools,
Public address systems, Wireless
equipments Gestetners etc.
11 Plant / Road rollers, Mixing mortars, 10 years 25
Machinery & other Civil Engineering
Equipment equipments, Medical equipments
(excluding in Hospitals, Dispensaries &
office Maternity centres, School
equipment) equipments public health
equipments, Tower clocks,
electrical equipments including
generator, Motor pumps, other
Plant & Machinery etc
12 Roads & - 10 years 25
Pavements
Concrete
(including
barricades)
13 Roads & - 6 years 40
pavements black
topped(including
amenities)
14 Roads & - 3 years 60
pavements
asphalt & WBM
15 Roads & - 50 years 5
pavements
concrete, Black
topped-Sub-
 grade
16 Electrical HT & LT 20 years 14
installation –
Transformers,
Cables
17 Electrical Mercury Vapour Lamps, Sodium 10 years 25
Installation - Vapour Lamps
Lamps Tube Light Fittings 3 years 60

18 Bulls Bulls for carts 3 years 60

19 Computers Computer Machinery, 5 years 20
peripherals like printers, mouse
etc
20 Carts Single & Double Bullock carts 3 years 60

TABLE – B

WATER SUPPLY AND DRAINAGE FUND ACCOUNT

Life of Assets and rates of depreciation to be adopted under Straight Line Method.

Note: Life and rate of depreciation to be adopted in respect of Buildings, other civil
structures, Furniture, Fixtures, Office equipments, Lorries, Jeeps & Cars are the same as
applicable to other departments as mentioned in TABLE – A

Sl. Description of Details of Assets that are to be Estimated Percentage

No. Assets included Life of Depr.
21 Water Supply 1. Reservoirs 33 years 3.0
Source and 2. OHT / GLR - do - - do -
Transmission 3. Ground Water Wells / Deep 20 years 5.0
System bore wells
4. Channels 40 years 2.5
5. Conduits 50 years 2.0
22 Water Pipe Lines:
Distribution 1. Upto 200 m.m. (dia) 40 years 2.5
System 2. Above 200 m.m. (dia) 60 years 1.67
23 Water 1. M.S. Steel Tanks 5 years 20
Distribution 2. India Mark II Pumps 5 years 20
System 3. 3. Hand Pumps 5 years 20
4. Public Fountains 5 years 20
24 Sewerage Sewerage Lines 30 years 3.33
Collection &
Transmission
System
25 Plant and (a) Water Supply 10 years 10
 Machinery 1. Mechanical Filters
2. Filter Beds
3. Head works, Well points
4. Generator of Booster Station
(b) Sewerage
1. Pumping Machinery 10 years 10
2. Treatment Plants
26 Laboratory All equipments in the Laboratories 10 years 10.0
Equipments maintained for the Water Supply and
Sewerage system

11. Accumulated Depreciation Fund:

Under this method, the Asset Account is allowed to stand in the books at its original cost
from year to year. At the end of each year, the depreciation at the rates prescribed for
various kinds of assets, while charging to Income and Expenditure Account, is taken to
Accumulated Depreciation Fund Accounts of respective assets, by preparing depreciation
work sheet in MCF 35.

(i) If the amount out of this fund is invested in Fixed Deposit, the entry
will be as below:-
Accumulated Depreciation Fund Investment A/c Dr
To Bank Cr

(ii) The periodical interest realized on such Fixed Deposits will be

accounted as under:-
Bank A/c Dr
To Accumulated Deprecation Fund A/c Cr.

Such interest earned should also be invested in the same type of Fixed
Deposit.

The above accounting system will enable providing a fund for their replacements at the
time when the old assets have to be discarded and replaced by new ones, without, in
anyway, disturbing the financial condition of the Municipality.

Note: The guidelines on Accounting for fixed assets, as prescribed by the revised
Accounting Standard (AS-10) included in Appendix – II to this Manual shall be followed
for Accounting of Assets.
 CHAPTER – 10

LOANS AND GRANTS ACCOUNTING

(a) (i) The Government extend the financial assistance to the Municipalities, by way of
LOANS and GRANTS for creating assets in order to earn income therefrom and for
providing infrastructure facilities in the municipal areas. Besides Loans are received from
Financial Institutions like TUFIDCO, TNUDF, HUDCO etc. At times, ways and means
advance is also obtained from the Government to tide over financial difficulty faced by
them. Specific grants are sanctioned by the Government for implementation of specific
schemes by them.

(ii) The fundamental principle is that the loans and grants specifically sanctioned for
capital works / projects etc. should be utilized for the purpose for which they are
sanctioned and that they should not be diverted for any other purposes. To avoid such
wrong or improper utilization, it is necessary that the funds received under this category
are kept distinct from the REVENUE FUND. With this object in view, a separate fnd
called ‘CAPITAL FUND’ is to be created and mainained.

(iii) So, the ‘CAPITAL FUND’ should have a separate Bank Account. In this Fund, by
accounting all loans and grants for specific purposes, the progress of the expenditure on
Projects is effectively watched. However, the grant i.e. allocation of state resources by
means of financial devolution based on specific norms, on the recommendation of the
State Finance Commission called ‘Devolution Fund’ ways and means advance and other
revenue grants such as M&CW grant, Anti-filaria grant etc. should be accounted under
REVENUE FUND only.

(iv) The capital grant referred to above, is in the nature of contribution to the equity of the
Municipality. Hence it should be transferred to the contribution account on completion of
a project, to the extent of the cost of the asset created out of such grant. Accordingly,
provision is made in the Assets and Liabilities Account under CAPITAL FUND.

(b) Receipts:

The LOAN LEDGER, now in force, should be continued to be maintained to watch the
receipt and repayment of loan.

(1) On receipt of loan, the following journal entry is to be made

Bank Account Dr
To Loan Account Cr
(Specify Account Code No)
(2) For repayment of loan / Ways and means Advances the following journal entry is to
be made.
Loan Account / Ways and means Advances A/c Dr
(3123) To Bank A/c Cr
(This is paid from Capital Fund)

(3) For payment interest on loan i.e. Interest portion of the annuity

2029 – Interest of Loan A/c Dr

(3066) – To Bank A/c Cr
(This is paid from Revenue Fund)

(i) For utilization of loan amount for the purpose for which it was received, the Loan
Appropriation Register will be continued to be maintained.

(ii) Similarly, the MDR for grants will continue to be maintained for watching the receipt.
The Grant Appropriation Register should be maintained for utilization of the grant.

On receipt of the grant, the following journal entry shall be made;

Bank Account Dr
4014. To Grant from the Government Cr
(Nature of grant to be specified)

The accounting system for incurring expenditure out of the loans and grants and
assetising such expenditure periodically, on completion of works or projects, is
prescribed under the previous chapter.

(iii) The Grant Appropriation Register is provided with columns for noting down the
progress of expenditure. The Capital expenditure incurred shall be accounted for in the
Projects Ledger and the ‘Projects-in-Progress’ Account in the General Ledger (MCF 34)

(c) Revenue Grants:

As regards the revenue grants that are very specific, like grant for M&CW scheme, Anti-
malaria programme etc., the amount of grant due should be worked out and the claim
preferred immediately after the financial year is over, but before the closure of the
accounts for the year. The grant so due, should be brought to ‘Grants Receivable
Account’ by a G.J.V. with the following entries

3020. Specific Grant Receivable Account Dr

(Nature of Grant to be specified)
1052. To Grants for Schemes Implementation Cr
(d) Capital Grants
(To be included)

(e) Reconciliation of Outstanding Loans

(i) At the end of the financial year, a Loan & Grants STATUS REPORT should be
prepared. The total of loans outstanding at the end of the year should be tallied with the
respective folios in the General Ledger as well as Loan Ledger.

(ii) Similar reconciliation should be done periodically with the Accountant General’s
office or office of the Director of Municipal Administration as per the instructions of the
DMA / the Government, from time to time.

(f) Sinking Fund:

When the financial position improves, action should be taken to create a SINKING
FUND with the sanction of the council and the Government to enable the Municipality to
become a viable one. Consequently action should be taken to get ‘Credit Rating’
certificate by one of the independent agencies.

CHAPER – 11

DEPOSITS AND ADVANCES ACCOUNTING

(a) (i) The Accounting under “Deposits and Advances” is an important function
attended to, by the accounts cell.

(ii) The deposits that are received from the Lessees, Contactors, Staff members
and others should find place in under “Liabilities”, in view of the fact that
they are either refundable, when claimed , on proper authority or adjusted to
service heads under specific orders of the appropriate authority. The deposits,
here, include security deposit.

(iii) There is a misconception that items of receipt (income) that could not be
Classified can be conveniently brought under “Deposit”. This is undesirable,
unhealthy, and not permissible, because in the long run, to say after a year, there
is a possibility of refunding such items to person to whom these items are
not, in fact, due. As account code numbers have been assigned to all items of
income, there is absolutely no need to resort to accounting a particular item of
revenue, under “DEPOSIT” instead of accounting it under the relevant
Account code No. under Income.
 (iv) The advances paid to the staff members and others should find place under
“Assets”, in view of the fact that they are either recovered as such or adjusted
to the specific service head.

(v) Advances to the employees are paid as a sort of staff welfare measure.
Similarly, advances for other purposes are allowed, to expedite a purchasing or
executing work, in view of urgency of the matter and for supply of cement,
bitumen etc. So, advances should be recovered in time, as per rules or adjusted
as soon as the purposes, for which they are drawn, are over.

(vi) Therefore, a periodical review of the pending advances by the Authority is

quite necessary, by initiating close pursuit of action against those to whom
advances were paid.

(vii) The accounting entries to be made for the credits and debits under these two
account heads are given below.

(1) DEPOSITS :

The deposits will be classified as :

a) Tender Deposit – Contractors (for execution of works)
b) –do- -- Suppliers (for satisfactory supply of materials)
c) Security Deposit – Revenue (Leases, auctions, bids, servicing etc.,)
d) –do- -- Staff
e) Deposits -- Others

The tender deposit and lessee deposit will include security deposit fixed and
collected additionally. Accordingly five distinct Account code nos. are given.
The register of deposits should be maintained separately for the above five
kinds or in a single register allocating separate pages depending upon the
volume of transactions.

Deposit amounts should not be used for revenue expenditure and deposits which
are not refundable in nature should be transferred to the capital accounts of the
concerned funds.

The deposits received from applicants of Water supply and drainage new house
service connections accounted for in code no.ws1081 should be treated as
“capital receipts” by keeping them in a separate bank account (code no.3140)
and the amount should be used, only for “debt – servicing”, execution of capital
works and for major repairs under water supply and drainage account heads.
The major repair would mean 10% of the depreciated value of the asset or Rs
10, 000/- whichever is higher spent on making the asset in an usable condition.

The deposits collected from the contractors, suppliers, lessees etc., and also
other non-refundable deposits (e.g. lapsed deposits) should not be used for
either revenue or capital expenditure. The amounts available in these account
code nos. should be reconciled and they should be invested in short term
deposits once in a quarter.
Immediate actions should be taken to reconcile that deposits amounts in the
various codes nos. with the register of deposits which were already diverted for
revenue expenditure and to invest them in a phased manner in short term deposit
on quarterly basis.

To account for Journal Entries Necessity / Purpose

i) Receipt Bank Account Dr. When the deposit is remitted either
To specific deposit in cash or by cheque or DD, it will
Account Cr be covered in the daily BRV
ii) Refund Specific Deposit A/c Dr. Asusual, the existing deposit
refund voucher duly approved by
To Bank Cr the authorized officer should be
first prepared and BPV duly
signed by him, insisting on
enclosing original chalan/receipt
or certificate for verification of
credit entry in the records, making
an endorsement for refund over the
attestation by the
commissioner/Asst commissioner
(accounts), where the party’s
chalan is not given at the time of
receiving deposit
iii) Adjustment Specific Deposit A/c Dr As no payment is involved, no
To specific receipt BPV is to be prepared. Only EJV
head of account to is to be prepared with specific
which it should be order copy and with due intimation
adjusted Cr to the depositor
iv) Forfeiture Specific deposit A/c Dr Here also, since no payment is
1073. To deposit forfeited involved, only EJV is to be
account Cr prepared with a copy of specific
order for forteiture and due
intimation to the concerned party
v) Lapsed Specific deposit A/c Dr No payment is involved, as in the
1074 To Lapsed deposit above two cases. It is enough if an
Account Cr EJV is prepared based on
approved list with a copy of
specific orders lapsing the deposits
to the council
(2) Advances:

I. Payment:

The advance includes,

a) Payment of employees’ advances such as Festival Advance, Marriage advance,
handloom advance / khadi advance, flood advance, house building advance,
conveyance advance, advances of pay and travel expenses on the eve of transfer,
tour advance, immediate relief advance etc.
b) Advance to suppliers
c) Advance to contractors
d) Other advances

The advance recoverable register is to be maintained separately for each kind of advance.

II. Adjustment / Recovery:

a) The advances paid are to be recovered by adjustment from pay bills of staff,
suppliers’ bills contractors’ bills etc. In some cases, the advances will be
recovered in cash.
b) In respect of advances paid to the suppliers, contractors and others, the adjustment
will be of two kinds as explained below
c) When the bill amount is more than the advance paid, the advance will be adjusted
and the balance of the bill will be paid.
d) When the bill amount is less than the advance paid, the advance will be adjusted
and the balance of advance will be recovered in cash or by cheque.

To account for Journal Entries Necessity / Purpose

i) (a) Staff Advance – Advance (specific kind of A BPV is to be prepared
Interest free advance) account Dr enclosing a copy of the
To Bank Account Cr proceedings sanctioning the
advance by making
simultaneous posting in the
advance recoverable
register maintained both in
the accounts cell and the
department concerned. This
will precede passing of bill
for payment
i) (b) Interest bearing GJV Interest should be
advance like marriage 3047 Interest on calculated and the General
advance Staff advance - recoverable) Journal voucher prepared,
1,000 to ensure that the interest
 1071 Interest on
Staff advance 1,000
BPV
4045 Marriage advance
10,000
3066 - Bank A/c 10,000
amount is recovered after
the recovery of advance
amount is over
Note:
(1) Separate pages shall be
allotted in the register of
advances recoverable to
accommodate recovery of
interest after the advance
amount is recovered

(2) Though the interest of

ii) Advance to the suppliers
Rs. 1,000/- can be
recovered after 5 years, the
income by way of interest is
accounted in the accounting
year in which the advance
was paid. This is only a
notional account and hence
it does not substantially
affect the Income &
Expenditure A/c
3051. Advance to the A BPV is to be prepared
suppliers Dr. enclosing a copy of the
To Bank Account Cr. sanction order for payment,
duly making posting in the
advance recoverable
register maintained in the
accounts cell. Besides, the
administrative sanction
concerned has to watch the
adjustment of advance paid
as soon as the specified
purpose/object for which it
is paid is over.

To account for Journal Entries Necessity / Purpose

iii) Advance to the 3052. Advance to the The above procedure is
contractors contractors A/c Dr applicable in this case also.
To Bank account Cr
Explanation: When the advance given in Sl. No. ii) & iii) above, is adjusted by getting an
account for it from the supplier/contractor, and by receiving the article or by getting the
work done, the I.T at prescribed rate should be deducted and the net payment is made
iv) Advances recoverable - 3054 Advance recoverable In cases where advances are
expenses A/c – paid for specific purposes
 Expenses Dr such as advance for
(Nature of advance to be transport charges paid to the
specified) engineer, advance for
To Bank account Cr purchase of stationery
articles for urgent
requirement, to a staff
member etc, a BPV is to be
prepared with specific
sanction of the appropriate
authority, making entry in
the advance recoverable
register maintained in the
accounts cell
v) Other advances 3055 Other advances The advances not covered
A/c Dr in the above categories will
To Bank A/c Cr be booking in this code,
such as advance to noon-
meal account, funeral rites
payment etc, by preparing a
BPV enclosing a specific
sanction order of the
commissioner and by
making entries in the
advances recoverable
register
vi) Adjustments 2001-2011 Salaries A/c Dr The monthly salary bill
To advance account should be accompanied by a
a) Pay bill recoveries 3028 – Festivel EJV in which all recoveries
Advance Cr with account code nos. are
3045 – Marriage specified. When the above
advance Cr EJV is given effect to, this
- and so on Cr journal entry is to be made.
The same procedure is
applicable for recoveries
made from supplemental
salary bills, by preparing an
EJV
b) Recovery of advance by Bank Account Dr When the festival advance
CASH To advances account or any other personal
3028- Festival advance Cr advance is remitted in cash
3045 – Marriage through chalan with code
Advance Cr no. etc in the treasury, the
- and so on Cr chalan is included in the
daily collection of the
Treasury and accounted for
through BPV prepared for
 the day and reflected in the
receipt book. As one copy
of the above receipted
chalan is forwarded to the
assistant incharge of the
advances accounting in the
accounts cell, he should
with reference to the copy
of chalan received, give
posting in red ink in the
advance recoverable
register
c) Adjustment of advance to By PJV A BPV is to be prepared on
the suppliers (1) Specific Expenses receipt of suppliers’ bill and
A/c Dr after scrutiny of the
(or) correctness of the claim
Specific stock A/c Dr duly supported by stock
3051. To advance entry, simultaneously
to the suppliers A/c Cr making posting in the
advance recoverable
4035 T.D.S A/c Cr register. This becomes
Suppliers necessary when payment is
made to the supplier over
4048. To accounts and above the advance
payable A/c – already paid and now
Suppliers Cr adjusted in the books of
accounts. The Income Tax
By BPV due should also be deducted
4048. Accounts payable A/c at source.
Suppliers Dr
To Bank A/c Cr

(2) 4035 – T.D.S. A/c Dr

(3123) - bank A/c Cr
(When I.T is remitted to I.T.
department)
d) Adjustment of advance to By CJV The procedure applicable in
the contractors (1) Specific expenses the case of advance to
A/c Dr suppliers is equally
3052. To Advance applicable here with
to the Contractors A/c Cr suitable modification
4035.T.D.S.Contractor Cr thereof. But care should be
taken to see that T.D.S.
4047 To accounts payable aspect is not lost sight of
A/c contractors Cr
By BPV
 4047. Accounts payable A/c
Contractors Dr
To Bank A/c Cr

(2) 4035 T.D.S. A/c Dr

(3123) Bank A/c Cr
(When I.T. is remitted to
the I.T. Dept)
e) Adjustment of other By EJV
advances Specific expenses
A/c Dr
3055. To other advances
recoverable A/c (to be
specified) Cr
4049. To accounts - do -
payable A/c -
Expenses Cr
By BPV
4049. Accounts payable
A/c expenses Dr
To Bank A/c Cr
Specific expenses There may be cases where
A/ Dr the expenses incurred out of
the advance will be lesser
3055. To other advances than the advance
recoverable A/c Cr paid/drawn. In such cases,
besides presenting the
adjustment bill with the
EJV, the balance of advance
is to be remitted in cash
through chalan. For the
balance of advance remitted
in cash through chalan, and
included in the Treasury
Daily Collection and
covered in the BRV, the
copy of receipted chalan
meant for the assistant in
charge of advances should
be used for making entry in
red ink in the Advance
Recoverable Register
 CHAPTER – 12

WATER SUPPLY AND DRAINAGE FUND ACCOUNTING

The policy of the Government is that the water supply and drainage fund should be kept
separate and distinct inorder to assess its self sufficiency. But in many of the
municipalities, this fund accounting is continued to be maintained under the General
Fund (Revenue fund). In three municipal corporations and in some municipalities it is
kept separate.

This account has to be necessarily kept separate and distinct as ‘REVENUE ACCOUNT’
and ‘CAPITAL ACCOUNT’ within the water supply & drainage fund account.

1. REVENUE ACCOUNT:

1. Income:

The following items are to be accounted under ‘Income’

(i) The water supply and drainage tax component of property tax
(ii) Charges for water supplied through individual house service connections for
which Demand Registers are maintained (Metered / Tap rate charges)
(iii) Cost of application forms for new connections
(iv) Centage charges on providing new connections
(v) Recovery towards cost of materials supplied by the municipality and used for
providing new connections
(vi) Cost of supplying water through lorries on prepayment
(vii) Other income – water supply
(viii) Sewerage connection charges in case where the sewerage system is available
(ix) Sewage farm receipts
(x) Other income – Sewerage

The code nos. provided in the chart of accounts for income account heads should be used
to the above income items, with departmental prefix ‘WS & SF’ allotted to this
department.

One important aspect that should be noted in this account is that the deposits received
from the house owners for new service connections need not be accounted under
‘Liabilities’ as we do, in the case of revenue fund and capital fund, because no occasion
would normally arise for refund to the house owners. So, it should be accounted under
code no. 1081 in the capital account meant for utilizing on repayment of loan / execution
of specific scheme or for carrying out major repairs by maintaining a separate bank
account. This deposit is known as ‘initial amount’ for giving new water supply and
drainage connections. So, it should be invested in short term deposit in the bank in such a
manner that it is readily available to repay the loan on due dates. As such, this deposit
should not be used for Revenue Expenditure.

(2) Expenditure:

The following items are to be accounted under ‘Expenditure’”

(i) Salaries of Engineers and other Engineering staff and the staff like sewage
farm superintendent and supporting staff incharge of water supply and
sewerage including ministerial staff attending to these sections.
(ii) Maintenance charges for pumping stations including electricity charges
(iii) Purchase of bleaching powder, alum and other chlorination materials.
(iv) Vehicles – maintenance including cost of petrol / diesel
(v) Bore wells for water supply – maintenance
(vi) Cost of maintenance for sewerage system
(vii) Cost of maintaining Sewage farm
(viii) Royalty payable to the Government
(ix) Demand raised by TWAD board for maintaining combined water supply
schemes
(x) Interest on loans
(xi) Repayment of loans
(xii) Other expenses

The code nos. provided in the chart of accounts for expenditure account heads should be
used to the above expenditure items with the departmental prefix ‘WS & SF’ allotted to
this department.

2. CAPITAL ACCOUNT:

The loans or capital grants received are to be directly accounted in the ‘Capital Account’.
The expenditure incurred, are accounted under this Capital Account by maintaining the
Projects Ledger. Necessary ‘account heads’ have been provided for this purpose. The
accounting system is the same that is applicable to other Funds.

3. ACCOUTING PROCEDURE:

(i) The following authorized items of Revenue Expenditure may be met from the
Devolution fund in terms of G.O. Ms. No. 109. MAWS dated 3.5.97.

1. Electricity charges – Water supply

2. Monthly maintenance charges claimed by TWAD board
3. Water supply maintenance including purchase of bleaching powder, alum etc
4. Maintenance of underground drainage system
5. Maintenance of sewage farm
6. Payment of pension contribution and retirement benefits
7. Staff salaries
 8. Interest on loans

(ii) The actual amount required for the above purposes, should be assessed and got
transferred from code no. RF 1053 and credited to code no. WS1053 by cheques and then
only payments made and accounted for, under the respective heads of accounts by
providing prefix ‘DV’ to such of those cod nos. and BPVs through which they are paid.

(iii) It should be noted that only the exact amount (Gross) required should be worked out
and got transferred to this fund account. For some reason or other, if any amount so
transferred as above is found to be more than the amount actually spent, then such
amount should, forthwith, be remitted back to the credit of code no. RF 1053.

The underlying idea behind this is that only the required amount should be received from
the Devolution fund in the Revenue Fund account.

(iv) In respect of Pension Contribution payable on behalf of superior employees working

in this department, to the Pension Fund of the Director of local Fund Audit, the amount
due is deducted by the Director of municipal administration from the Devolution fund
released by him on quarterly basis and remitted to the Director of Local Fund Audit.

Hence the following adjustment entries only have to be made in the accounts through
G.J.V.

WS2039 Pension Contribution to the

Municipal Employees Pension Fund Dr
WS1053 To Devolution Fund Cr

5. Compilation of accounts:

The following records and Accounts have to be prepared for compilation of the monthly
and annual accounts relating to the water supply and drainage fund.

1. Daily
(i) Receipt book
(ii) Payment book
(iii) General Ledger

2. Monthly
Trial balance

3. Annual

The Income & Expenditure Account and the Balance sheet are integrated in those
accounts prepared for the municipality as a whole.
6. General

1.The Municipal Engineers are incharge of both civil works and water supply works and
hence they should apply their mind while processing the claims and incurring
expenditure, to specify code no. under which the expenditure should be incurred. For
example, there are two jeeps under the control of the Municipal Engineer, one for civil
work and another for water supply. The maintenance expenses, payment of M.V.T.,
insurance etc., should be analysed first and specific code nos. indicated on the vouchers
prepared by him.

2. Another claim is payment of power charges, one for street lights and another for head
works, booster station etc, under water supply. While proposing for payment, the EJVs
and BPVs should be prepared with correct classification of expenditure.

3. With such a close co-operation and support form the departmental officers, the
accounts cell would be in a position, to clear the liabilities, expeditiously and classifying
the expenditure properly.

CHAPTER – 13

PREPARATION OF OPENING BALANCE SHEET

1. The preparation of opening balance sheet as on the date of introduction of accrual

system of accounting is an important item of work.

2. The main objective is to ascertain the various municipal assets and liabilities and
thereby its net worth and to provide a starting point for the operation of the accrual
system.

3. As a prelude, detailed data have to be gathered from this existing records and various
sources. In order to collect such data in respect of all kinds of assets and liabilities at any
given date, 24 schedules have been designed and included in vol – III of this manual ,
with instructions, wherever necessary, to fill up the schedules with required details.
Hence efforts should be made to gather the relevant details without any omission and to
ensure their accuracy at all levels.

4. Three balance sheets have to be prepared based on the data gathered through the
various schedules mentioned above for the following funds.

(i) Revenue Fund and Capital Fund

(ii) Water supply and Drainage fund
(iii) Elementary Education fund
5. Any inaccuracy or incompleteness in any of the assets / liabilities listed under different
funds will affect the amount shown by accumulated surplus in the balance sheets which is
nothing but to balance figures on both sides of the liabilities and assets. Hence future
adjustments have to be made in this amount based on changes, if effected, in other items.

6. The model opening balance sheet annexed to this chapter are arranged in such a
manner that the code nos. allotted for them can be easily adopted for subsequent
integration with the first balance sheets to be prepared in the accrual system.

7. Based on the preparation of the Opening balance sheet – Fundwise – Opening entries
have to be made in the Form of a GJV for each Fund, debiting the value of all assets and
crediting the various liabilities. The difference shall be taken as accumulated surplus
(liabilities side) or accumulated deficit (asset side)

8. The formats for the Income and Expenditure account and the balance sheet are
included in the Accounting Manual Volume - III.

…………… MUNICIPALITY
..…………. CORPORATION

Opening Balance Sheet as on 1st Apr for Revenue and Capital Funds

Liabilities Rs Assets Rs
• Govt Loans • Land
• Ways & Means Advance • Buildings (including
• Loans from other High & Higher
Financial Agencies Secondary School
• Tender deposits buildings)
# Contractors • Cause Ways & Subways
# Suppliers • Storm Water drains
(including open drains)
• Security Deposits • Culverts
# Suppliers • Vehicles
# Contractors * Heavy
# Staff * Light
# Others * Others
• Furniture, Fixtures &
• P.F. Recoveries Payable Office equipments
• Interest payable • Plant & Machinery
• C.M.D.A. / LPA • Roads, Street & Lanes
Contribution - Payable • Electrical –
• Account payables * Cables
…………. * Luminary fittings
…………. * Sub-stations
• Library cess payable • Projects-in-progress
 • Outstanding bills • Investments
• Outstanding Salaries • Stock
• Education Tax payable • Advances
• Water Supply & Drainage * Suppliers
Tax payable * Staff
• Accumulated Surplus * Others
• Property tax recoverable
• Other taxes and fees
recoverable
• Arrear Grants
recoverable
• Assigned revenue
recoverable
• Road cut charges
recoverable
• Cash on hand
• Cash at bank of various
Accounts

Note: For inclusion of more Assets & Liabilities and reference of Code numbers refer to
Form no. AFII in Volume III.
 …………… MUNICIPALITY
..…………. CORPORATION
Water Supply and Drainage Fund
Opening Balance Sheet as on 1st Apr ……………….

Liabilities Rs Assets Rs
• Govt Loans • Land
• Ways & Means Advance • Buildings
• Loans from other • Resorvoirs
Financial Agencies • Booster Station
• Tender deposits • Pumping station
# Suppliers • O.H.T.s
# Contractors • Water supply main
• Plant & Machineries in
• Security Deposits sewage farm
# Suppliers • Sewerage Mains
# Staff • Ground water wells
# Others • Deep bore wells
• India Mark II pumps
• Recoveries from • Vehicles
Employees’ Pay bills - * Heavy
payable
* Light
• Interest on loan * Others
• Furniture, Fixtures &
Payable Office equipments
• Maintenance charges • Plant & Machinery
Payable to TWAD
• Projects-in Progress
Board / Metro Water
• Investments
Board
• Stock
• Account Payables
…………….. • Advances -
…………….. * Suppliers
* Staff
• Outstanding bills
* Others
• Outstanding salaries
• Water supply & Drainage
• Accumulated Surplus
tax receivable
• Water charges
recoverable
• Arrear Grant recoverable
• Cash on hand
• Cash at bank
Note: For inclusion of more Assets & Liabilities and reference of Code numbers refer to
Form no. AFII in Volume III.

…………… MUNICIPALITY
..…………. CORPORATION
Elementary Education Fund

Opening Balance Sheet as on 1st Apr ……………….

Liabilities Rs Assets Rs
• Land
• Outstanding salaries • School Buildings
• Other payables • Vehicles (including
• Accumulated Surplus school vans, if any)
• Furniture, Fixtures &
Office equipments
• Bank balance
• Pension payment to the
Teachers – recoverable
from the Govt.
• Education tax -
receivable

Note: For inclusion of more Assets & Liabilities and reference of Code numbers refer to
Form no. AFII in Volume III.
 CHAPTER – 14

COMPILATION OF ACCOUNTS

All activities will result in ultimate financial transactions which are to be recorded in their
two fold effects under this system in original books of entry, that is, in ‘Receipts Book’
and ‘Payments Book’ and also in the other subsidiary ledgers like projects ledger, deposit
register, advance recoverable register, priced stores ledger etc. The basic documents
which are responsible for maintenance of the above records are BRVs, PBVs, GJVs,
EJVs, PJVs, CJVs and FAJVs, the importance and preparation of which are already
explained in this manual in detail.

2. The following financial statements are to be prepared for a year to ensure proper
functioning are made or liabilities created, only on authorized objects and purposed
related to their functioning.

(a) Monthly
(i) Trial balance
(ii) Projects expenditure statement

(b) Annually
(i) Income and Expenditure account (AF 1A and AF 1B)
(ii) Balance sheet (AF II)

3. Trial Balance
The following documents have to be posted daily and closed monthly to prepare the trial
balance

(i) Receipts book

(ii) Payments book
(iii) General Ledger

(a) Receipt book

The bank receipt vouchers (BRVs) numbered serially are prepared for daily collections
and remittances should first ensure that the copies of BRVs are all available in a
chronological order.

Whenever the credit entries are to be reversed on account of dishonoured cheques, the
Bank Payment Voucher (BPV) para 5 of para (5) ‘Accounting of Dishonoured cheques’
under chapter ’02. (a) Property Tax Accounting’ should be available.
These two documents should be used for preparing the receipt book.

(b) Payments book

The copies of all Bank Payment Vouchers (BPVs) serially numbered through which
cheques were drawn, in a serially arranged manner should also be transferred to the
compilation section of the accounts cell.

From the in-puts viz. BPVs the payments book is brought out as out-put.

(c) Preparation of Bank Reconciliation Statement:

The bank scroll which is the bank’s record of the transactions between the bank and the
municipality for receipts and payments at any particular date agree with the bank
balances as shown in the receipts book and payments book.

Note: The commissioner should appraise the manager of the need to furnish the bank
scrolls on weekly basis and withdrawals systematically to guard against possible
defalcations of the money meant for remittance and manipulation in writing cheques.

This is an important function to ensure that the balances in the receipts book and the
payments book agree with those in the bank scrolls at the end of each month.

The differences are bound to occur for various reasons. Reconciliation statement should
be prepared ‘monthly’ to indicate the items of disagreement on any given date after
ticking off all the items in the scroll with the entries in the receipts / payments books.
The unticked items in the bank scroll will relate to the credits given but not credited or
cheques issued but not presented by the parties for payment. By preparing ‘plus & minus
memo’ which is otherwise known as Bank Reconciliation statement, agreement could be
effected subject to the subsequent settlement by close watch over those items.

(d) General Ledger (MCF 34)

Every transaction covered either by BRV or BPV or Journal Vouchers (GJV, EJV, PJV,
CJV & FAJV) after first being recorded in the books of original entry viz, receipts book,
payments book and bank transfer book finds its subsequent destination in General Ledger
in which the transactions reflect in a more properly arranged classified and condensed
form. Thus the summary of the transactions recorded in the receipts book, payments
book, bank transfer book and in different kinds of journal vouchers would be posted head
may represent either an asset or an expense. Similarly the NET credit balance of any
account head represents either a liability or a gain. The General Ledger for Water supply
& Drainage fund and elementary education fund should also be maintained separately on
the above lines.

4. Preparation of Trial balance:

The principle of double entry is that for every debit, there must be a corresponding credit.
It follows that the sum total of the debit balances in various account heads in the general
ledger should be equal to the sum total of the credit balances in the other account heads.
This could be the proof and the income and expenditure account and the balance sheet. It
must be noted that the case on hand at Treasury and balance with bank collection account
/ the payment account as indicated in the receipts book and payments book after taking
into account transfers out and transfers in through bank transfer book should be included
in the trial balance.

5. The trial balance may not be construed as a conclusive proof as to the absolute
accuracy of the books since some discrepancies as detailed here under are bound to creep
in.

(i) Omission of any entry in the original book

(ii) A wrong entry in the original book
(iii) Posting an item to the wrong account
(iv) Compensating errors
(v) Errors in totaling
(vi) Errors in extracting balances
(vii) Errors in totaling and balancing the ledger accounts
(viii) Errors in posting from JVs to the general ledger
(ix) Errors of principle
(x) Omission to post one aspect of an entry

(b) Posting one aspect to the wrong side of the account head
(c) Posting one aspect of an entry twice under the same ledger account head

6. Some of the steps that have to be taken to find out those errors and set right them are
given below

Note: At times the trial balance will show odd or exceptional balances. For eg, asset
account (always to show debit balance) would show credit balance and so also an
expenses account, a net credit balance instead of a net credit balance instead of a net debit
balance.

Steps to be taken:

1. Re-check the totals of the trial balance

2. See that the inclusion of cash and bank balance in not omitted.
3. Based on the side, i.e. debit side or credit side, if the difference exists, it
may be an amount exactly equaling the difference that has been left out
unposted
4. Scan the journals to see that the total debits and credits of each entry tally
5. Check the totals of the subsidiary ledgers
Thus the trial balance having been agreed, the income and expenditure account should be
prepared.

7. Projects Expenditure Statement

(a) This should be prepared monthly from the project wise cost to date, n the projects
ledger and the totals of the ledger should be reconciled with the projects-in-
progress account in the general ledger. This would act as an additional check on
the accurate maintenance of the Project records.
(b) Interest paid on loans should also be added on to the cost of the project during the
construction period only. Supervision charges and cost of departmental labour
among the various projects in execution annually and finally on completion.
(c) The capital grants are in the nature of contribution to the equity of the local body.
They to the extent of the cost of the asset created out of such grants.
(d) Thus this statement would provide ‘cost data’ indicating budgeted sanction,
balance available, expected over-run and expected date of completion of each
project.

8. Income and Expenditure Account

It includes all income earned during a year whether actually received or not and all
expenditure incurred whether actually paid or not. It does not commence with any
balance. It includes revenue items only. The same procedure is applicable for the Income
and Expenditure accounts of Water supply and Drainage fund account and Elementary
Education fund account with the prefix provided therefor. It will cover only the income
or expense belonging to the year for which it is prepared. The difference between the two
sides would mean either net surplus for the year or net deficiency for the year and it must
always be accompanied by the relative balance sheet.

The following steps will be the guidelines in the preparation of this account

1. Exclude the opening and closing cash and bank balances

2. Eliminate all the items of capital receipts and payments
3. Exclude income of the previous period or any income received in advance
4. Provide for accrued income i.e. the income earned during the period but not
received
5. Exclude expenditure either of the preceding period or the succeeding period
6. Provide for expenditure due but not paid (outstanding bills that are payable)
7. Provide for reserve for doubtful

Thus the income and expenditure account is prepared summarizing all revenue income
and expenditure to determine the net revenue surplus / deficit in the financial year and
taken to the balance sheet as excess income over expenditure or excess expenditure over
income

9.Balance sheet:
 (a) A balance sheet is a statement prepared with a view to measure the exact financial
status of the municipality at the end of the financial year (accounting year). It is
prepared from the balances representing Assets (Fixed and Current) and
Liabilities (Long term and Current liabilities) in the Trial balance to determine the
net worth as at the end of that period.

A balance sheet covering all the funds should be prepared for the municipality as a
whole. If necessary the fundwise balance sheet segregated from this balance sheet.

The balance sheet shall generally include the following schedules (statements) as
annexures thereto.

1. The schedule of assets showing the details of descriptions, opening balances with
value, additions and deletions, depreciation and their closing balances.
2. Schedule showing the various liabilities like deposits repayable etc
3. Schedule showing the different kinds of advances pending recovery or adjustment
4. Schedule showing the various grants received and kept utilized at the end of the
year
5. Loan schedule showing the various loans received and the amounts standing
unutilized at the end of the year and
6. Loan account indicating the loans outstanding at the end of the year
7. Schedule showing the details of investments

The software package is so designed as to take out all such schedules (statements)
required to be enclosed to the balance sheet.

(b) The statements of the receipts and the payments for all other accounts mentioned
in para (3) c under chapter ’01 Introduction’ and a statement of receipts and
payments in respect of the Devolution Fund should be prepared and annexed to
the consolidated balance sheet and placed before the council.

10. Due date for finalisation of acounts:

The accounts mentioned above shall be finalized in all respects duly signed by the
commissioner on or before 30th June next and placed before the council on or before the
date prescribed by the Govt.

11. General:

The preparation of all such statements would establish built-in discipline in the accounts
cell and major accounting errors, such as wrong treatment of a revenue / capital item,
omission to provide for any liability etc., would get highlighted and corrective action
could be taken, besides exhibiting the true Financial Position in a financial year
(accounting year) to assess the institution’s Financial Liquidity Value.
 APPENDIX – I

Valuation of Inventories (AS – 2)

Statements of Accounting Standards

(AS 2) Revised
Valuation of Inventories

(In this Accounting standard, the standard portions have been set in bold italic type.
These should be read in the context of the background material which has been set in
normal type, and in the context of the ‘Preface to the statements of Accounting
Standards’.

The following is the text of the revise Accounting Standard (AS) 2, ‘Valuation of
Inventories’ issued by the council of the Institute of Chartered Accountants of India. This
revised Standard supersedes Accounting Standard (AS) 2, ‘Valuation of Inventories’,
issued in June, 1981.

The revised standard comes into effect in respect of accounting periods commencing on
or after 1.4.99 and is mandatory in nature.

Objective

A primary issue in accounting for inventories is the determination of the value at which
inventories are carried in the financial statements until the related revenues are
recognized. This Statement deals with the determination of such value, including the
ascertainment of cost of inventories and any write-down thereof to net realizable value.

Scope

1. This statement should be applied in accounting for inventories other than :

(a) Work in progress arising under construction contracts, including directly related
service contracts (see Accounting Standard (AS) 7, Accounting for construction
contracts);
(b) Work in progress arising in the ordinary course of business of service providers;
(c) shares, debentures and other financial instruments held as stock-in-trade; and
(d) producers’ inventories of livestock, agricultural and forest products and mineral oils,
ores and gases to the extent that they are measured at net realizable value in accordance
with well established practices in those industries.

2. The inventories referred to in para 1 (d) are measured at net realizable value at certain
stages of production. This occurs, for example, when agricultural crops have been
harvested or minerals oils, ores and gases have been extracted and sale is assured under a
forward contract or a government guarantee, or when a homogenous market exists and
there is a negligible risk of failure to sell. These inventories are excluded from the scope
of this statement.

Definitions

3. The following terms are used in this statement with the meanings specified:

Inventories are assets:

(a) held for sale in the ordinary course of business

(b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in the production
process or in the rendering of services
(d) Net realizable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs
necessary to make the sale.

4.Inventories encompass goods purchased and held for resale, for eg, merchandise
purchased by a retailer and held for resale, computer software held for resale, or land and
other property held for resale. Inventories also encompass finished goods produced, or
work in progress being produced, by the enterprise and include materials, maintenance
supplies, consumables and loose tools awaiting use in the production process. Inventories
do not include machinery spares which can be used only in connection with an item of
fixed asset and whose use is expected to be irregular, such machinery spares are
accounted for in accordance with accounting standard (AS) 10, Accounting for Fixed
Assets.

Measurement of Inventories

5. Inventories should be valued at the lower of cost and net realizable value.

Cost of Inventories

6. The cost of inventories should comprise all costs of purchase, costs of conversion and
other costs incurred in bringing the inventories to their present location and condition.

Costs of Purchase

7. The costs of purchase consist of the purchase price including duties and taxes (other
than those subsequently recoverable by the enterprise from the taxing authorities), freight
inwards and other expenditure directly attributable to the acquisition. Trade discounts,
rebates, duty drawbacks and other similar items are deducted in determining the costs of
purchase.

Costs of Conversion
8. The costs of conversion of inventories include costs directly related to the units of
production, such as direct labour. They also include a systematic allocation of fixed and
variable production overheads that are incurred in converting materials into finished
goods. Fixed production overheads are those indirect costs of production that remain
relatively constant regardless of the volume of production, such as depreciation and
maintenance of factory buildings and the cost of factory management and administration.
Variable production overheads are those indirect costs of production that vary directly, or
nearly directly, with the volume of production, such as indirect materials and indirect
labour.

9. The allocation of fixed production overheads for the purpose of their inclusion in the
costs of conversion is based on the normal capacity of the production facilities. Normal
capacity is the production expected to be achieved on an average over a number of
periods or seasons under normal circumstances, taking into account the loss of capacity
resulting from planned maintenance. Variable production overheads are assigned to each
unit of production on the basis of the actual use of the production facilities.

10. A production process may result in more than one product being produced
simultaneously. This is the case, for eg, when joint products are produced or when there
is a main product and a by-product. When this is the case, they are often measured at net
realizable value and this value is deducted from the cost of the main product. As a result,
the carrying amount of the main product is not materially different from its cost.

Other Costs

11. Other costs are included in the cost of inventories only to the extent that they are
incurred in bringing the inventories to their present location and condition. For eg, it ma
be appropriate to include overheads other than production overheads or the costs of
designing products for specific customers in the cost of inventories.

12. Interest and other borrowing costs are usually considered as not relating to bringing
the inventories to their present location and condition and are, therefore, usually not
included in the cost of inventories.

Exclusions from the Cost of Inventories

13. In determining the cost of inventories in accordance with para 6, it is appropriate to

exclude certain costs and recognize them as expenses in the period in which they are
incurred. Examples of such costs are:

(a) abnormal amounts of wasted materials, labour, or other production costs;

(b) storage costs, unless those costs are necessary in the production process prior to a
further production stage
(c) administration overheads that do not contribute to bringing the inventories to their
present location and condition; and
 (d) selling and distribution costs

Cost Formulas

14. The cost of inventories of items that are not ordinarily interchangeable and goods or
services produced and segregated for specific projects should be assigned by specific
identification of their individual costs.

15. Specific identification of cost means that specific costs are attributed to identified
items of inventory. This is an appropriate treatment for items that are segregated for a
specific project, regardless of whether they have been purchased or produced. However,
when there are large numbers of items of inventory which are ordinarily interchangeable,
specific identification of costs is inappropriate since, in such circumstances, an enterprise
could obtain predetermined effects on the net profit or loss for the period by selecting a
particular method of ascertaining the items that remain in inventories.

16. The cost of inventories, other than those dealt with in para 14, should be assigned by
using the first-in, first-out (FIFO), or weighted average cost formula. The formula used
should reflect the fairest possible approximation to the cost incurred in bringing the items
of inventory to their present location and condition.

17. A variety of cost formulas is used to determine the cost of inventories other than
those for which specific identification of individual costs is appropriate. The formula
used in determining the cost of an item of inventory needs to be selected with a view to
providing the fairest possible approximation to the cost incurred in bringing the item to
its present location and condition. The FIFO formula assumes that the items of inventory
which were purchased or produced first are consumed or sold first, and consequently the
items remaining in inventory at the end of the period are those most recently purchased or
produced. Under the weighted average cost formula, the cost of each item is determined
from the weighted average of the cost of similar items at the beginning of a period and
the cost of similar items purchased or produced during the period. The average may be
calculated on a periodic basis, or as each additional shipment is received, depending upon
the circumstances of the enterprise.

Techniques for the Measurement of Cost

18. Techniques for the measurement of the cost of inventories, such as the standard cost
method or the retail method, may be used for convenience if the results approximate the
actual cost. Standard costs take into account normal levels of consumption of materials
and supplies, labour, efficiency and capacity utilization. They are regularly reviewed and
if necessary revised in the light of current conditions.

19. The retail method is often used in the retail trade for measuring inventories of large
numbers of rapidly changing items that have similar margins and for which it is
impracticable to use other costing methods. The cost of the inventory is determined by
reducing from the sales value of the inventory the appropriate percentage gross margin.
The percentage used takes into consideration inventory which has been marked down to
below its original selling prices. An average percentage for each retain department is
often used.

Net Realisable Value

20. The cost of inventories may not be recoverable, if those inventories are damaged, if
they have become wholly or partially obsolete, or if their selling prices have declined.
The cost of inventories may also not be recoverable if the estimated costs of completion
or the estimated costs necessary to make the sale have increased. The practice of writing
down inventories below cost to net realizable value is consistent with the view that assets
should not be carried in excess of amounts expected to be realized from their sale or use.

21. Inventories are usually written down to net realizable value on an item-by-item basis.
In some circumstances, however, it may be appropriate to group similar or related items.
This may be the case with items of inventory relating to the same product line that have
similar purposes or end uses and are produced and marketed in the same geographical
area and cannot be practicable evaluated separately from other items in that product line.
It is not appropriate to write down inventories based on a classification of inventory, for
eg, finished goods or all the inventories in a particular business segment.

22. Estimates of net realizable value are based on the most reliable evidence available at
the time the estimates are made as to the amount the inventories are expected to realize.
These estimates take into consideration fluctuations of price or cost directly relating to
events occurring after the balance sheet date to the extent that such events confirm the
conditions existing at the balance sheet date.

23. Estimates of net realizable value also take into consideration the purpose for which
the inventory is held. For eg, the net realizable value of the quantity of inventory held to
satisfy firm sales or service contracts is based on the contract price. If the sales contracts
are for less than the inventory quantities held, the net realizable value of the excess
inventory is based on general selling prices. Contingent losses on form sales contract in
excess of inventory quantities held and contingent losses on firm purchase contracts are
dealt with in accordance with the principles enunciated in Accounting Standard (AS) 4,
Contingencies and events occurring after the balance sheet date.

24. Materials and other supplies held for use in the production of inventories are not
written down below cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. However, when there has been a decline in the price
of materials and it is estimated that the cost of the finished products will exceed net
realizable value, the materials are written down to net realizable value. In such
circumstances, the replacement cost of the materials may be the best available measure of
their net realizable value.

25. An assessment is make of net realizable value as at each balance sheet date.
Disclosure

26. The financial statements should disclose:

(a) The accounting policies adopted in measuring inventories, including the cost
formula used; and
(b) The total carrying amount of inventories and its classification appropriate to the
enterprise

27. Information about the carrying amounts held in different classification of inventories
and the extent of the changes in these assets is useful to financial statement users.
Common classifications of inventories are raw materials and components, work in
progress, finished goods, stores and spares, and loose tools.

APPENDIX – II

Accounting for Fixed Assets (AS – 10)

The following is the text of the accounting standard 10 (AS 10) issued by the Institute of
Chartered Accountants of India on ‘Accounting for fixed assets’.

In the initial years, this accounting standard will be recommendatory in character. During
this period, this standard is recommended for use by companies listed on a recognized
stock exchange and other large commercial, industrial and business enterprises in the
public and private sectors.

INTRODUCTION

1. Financial statements disclose certain information relating to fixed assets. In many

enterprises, these assets are grouped into various categories, such as land, buildings, plant
and machinery, vehicles, furniture and fittings, goodwill, patents, trade marks and
designs. This statement deals with accounting for such fixed assets except as described in
para 2 to 5 below.

2. This statement does not deal with the specialized aspects of accounting for fixed assets
that arise under a comprehensive system reflecting the effects of changing prices but
applies to financial statements prepared on historic cost basis.

3. This statement does not deal with accounting for the following items to which special
considerations apply:
(i) forests, plantations and similar regenerative natural resources;
 (ii) Wasting assets including mineral rights, expenditure on the exploration for
and extraction of minerals, oil, natural gas and similar non-regenerative
resources
(iii) Expenditure on real estate development and
(iv) Livestock

Expenditure on individual items of fixed assets used to develop or maintain the activities
covered in (i) to (iv) above, but separable from those activities, are to be accounted for in
accordance with this statement.

4. This statement does not cover the allocation of the depreciable amount of fixed assets
of future periods, since this subject is dealt with in Accounting Standard 6 on
‘Depreciation Accounting’.

5. This statement does not deal with the treatment of Government grants and subsides,
and assets under leasing rights. It makes only a brief reference to the capitalization of
borrowing costs and to assets acquired in an amalgamation or merger. These subjects
require more extensive consideration than can be given within this statement.

DEFINITIONS

6. The following terms are used in this statement with their meanings specified.

6.1. ‘Fixed asset’ is an asset held with the intention of being used for the purpose of
producing or providing goods or services and is not held for sale in the normal course of
business.

6.2. Fair market value is the price that would be agreed to, in an open and unrestricted
market between knowledgeable and willing parties dealing at arms length who are fully
informed and are not under any compulsion to transact.

6.3. Gross book value of a fixed asset is its historical cost or other amount substituted for
historical cost in the books of account of financial statements. When this amount is
shown net of accumulated depreciation, it is termed as net book value.

EXPLANATION

7. Fixed assets often comprise a significant portion of the total assets of an enterprise and
therefore are important in the presentation of financial position. Furthermore, the
determination of whether an expenditure represents as asset or an expense can have a
material effect on an enterprise’s reported results of operations.

8. Identification of Fixed Assets

8.1. The definition in para 6.1 gives criteria determining whether items are to be
classified as fixed assets. Judgment is required in applying the criteria to specific
circumstances or specific types of enterprises. It may be appropriate to aggregate
individually insignificant items and to apply the criteria to the aggregate value. An
enterprise may decide to expense an item which could otherwise have been included as
fixed assets, because the amount of the expenditure is not material.

8.2. Stand-by equipment and servicing equipment are normally capitalized. Machinery
spares are usually charged to the profit and loss statement as and when consumed.
However, if such spares can be used only in connection with an item of fixed assets and
their use is expected to be irregular, it may be appropriate to allocate the total cost on a
systematic basis over a period not exceeding the useful life of the principal item.

8.3. In certain circumstances, the accounting for an item of fixed asset may be improved
if the total expenditure thereon is allocated to its component parts, provided they are in
practice, separable and estimates are made of the useful lives of these components. For
eg, rather than treat an aircraft and its engines as one unit, it may be better to treat the
engines as a separate unit, if it is likely that their useful life is shorter than that of the
aircraft as a whole.

9. Components of Cost

9.1. The cost of an item of fixed asset comprises its purchase price, including import dues
and other non-refundable taxes or levies and any directly attributable cost of bringing the
asset to its working condition for its intended use; any trade discounts and rebates are
deducted in arriving at the purchase price. Examples of directly attributable costs are:

(i) site preparation

(ii) initial delivery and handling costs
(iii) installation cost such as special foundations for plant and
(iv) professional fees for eg, fees of architects and engineers

The cost of a fixed asset may undergo changes subsequent to its acquisition or
construction on account of exchange fluctuations, price adjustments, changes in duties or
similar factors.

9.2. Financing costs relating to deferred credits or to borrowed funds attributable to

construction or acquisition of fixed assts for the period upto the completion of
construction or acquisition of fixed assts are also sometimes included in the gross book
value of the asset to which they relate. However, financing costs (including interest) on
fixed assets purchased on a deferred credit basis or on monies borrowed for construction
or acquisition of fixed assets are not capitalized to the extent that such costs related to
period after such assets are ready to be put to use.

9.3. Administration and other general overhead expenses are usually excluded from the
cost of fixed assets because they do not relate to a specific fixed asset. However insome
circumstances such expenses as are specifically attributable to construction of a project or
to the acquisition of a fixed asset or bringing it to its working condition, may be included
as part of the cost of the construction project or as a part of the cost of the fixed asset.

9.4. The expenditure incurred on start-up and commissioning of the project, including the
expenditure incurred on test runs and experimental production, is usually capitalized as
an indirect element of the construction cost. However the expenditure incurred after the
plant has begun commercial production, i.e. production intended for sale or captive
consumption is not capitalized and is treated as revenue expenditure even though the
contract may stipulate that the plant will not be finally taken over, until after the
satisfactory completion of the guarantee period.

9.5. If the interval between the date of a project is ready to commence commercial
production and the date at which commercial production actually begins is prolonged, all
expenses incurred during this period are charged to the profit and loss statement.
However the expenditure incurred during this period is also sometimes treated as
‘deferred revenue expenditure’ to be amortised over a period not exceeding 5 to 5 years
after th commencement of commercial production.

10. Self-Constructed Fixed Assets

10.1 In arriving at the gross book value of self-constructed fixed assets, the same
principles apply as those described in para 9.1. to 9.5 included in the gross book value are
costs of construction that relate directly to the specific asset and costs that are attributable
to the construction activity in general and can be allocated to the specific asset. Any
internal profits are eliminated in arriving at such costs.

11. Non-Monetary Consideration

11.1. When a fixed asset is acquired in exchange for another asset, its cost is usually
determined by reference to the fair market value of the consideration given. It may be
appropriate to consider also the fair market value of the asset acquired if this is more
clearly evident. An alternative accounting treatment that is sometimes used for an
exchange of assets, particularly when the assets exchanged are similar, is to record the
asset acquired at the net book value of the asset given up, in each case an adjustment is
made for any balancing receipt or payment of cash or other consideration.

11.2 When a fixed asset is acquired in exchange for shares or other securities in the
enterprise, it is usually recorded at its fair market value or the fair market value of the
securities issued, whichever is more clearly evident.

12. Improvements and Repairs

12.1. Frequently, it is difficult to determine whether subsequent expenditure related to

fixed asset, represents improvements that ought to be added to the gross book value or
repairs that ought to be charged to the profit and loss statement. Only expenditure that
increases the future benefits from the existing asset beyond its previously assessed
standard of performance is included in the gross book value, eg. An increase in capacity.

12.2. The cost of an addition or extension to an existing asset which is of a capital nature
and which becomes an integral part of the existing asset is usually added to its gross book
value. Any addition or extension which has a separate identify and is capable of being
used after the existing asset is disposed of is accounted for separately.

13. Amount Substituted for Historical Cost

13.1. Sometimes financial statements that are otherwise prepared on a historical cost
basis include part or all of fixed assets at a valuation in substitution for historical costs
and depreciation is calculated accordingly.

Such financial statements are to be distinguished form financial statements prepared on a

basis intended to reflect comprehensively the effects of changing prices.

13.2. A commonly accepted and preferred method of restating fixed assets is by appraisal
normally undertaken by competent valuers. Other methods sometimes used are
indexation and reference to current prices which when applied are cross checked
periodically by appraisal method.

13.3. The revalued amounts of fixed assets are presented in financial statements, either by
restating both the gross book value and accumulated depreciation so as to give a net book
value equal to the net revalued amount or by restating the net book value by adding
therein the net increase on account of revaluation. An upward revaluation does not
provide a basis for crediting to the profit and loss statement for accumulated depreciation
existing at the date of revaluation.

13.4. Different bases of valuation are sometimes used in the same financial statements to
determine the book value of the separate items within each of the categories of fixed
assets or for the different categories of fixed assets. In such cases, it is necessary to
disclose the gross book value included on each basis.

13.5. Selective revaluation of assets can lead to unrepresentative amounts being reported
in financial statements. Accordingly when revaluations do not cover all the assets of a
given class it is appropriate that the selection of assets to be revalued be made on a
systematic basis. For eg, an enterprise may revalue a whole class of assets within a unit.

13.6. It is not appropriate for the revaluation of a class of assets to result in the net book
value of that class being greater than the recoverable amount of the assets of that class.

13.7. An increase in net book value arising on revaluation of fixed assets is normally
credited directly to owner’s interests under the heading of revaluation reserves ad is
regarded as not available for distribution. A decrease in net book value arising on
revaluation of fixed assets is charged to profit and loss statement that, to the extent that
such a decrease is considered to be related to a previous increase on revaluation that is
included in revaluation reserve, it is sometimes charges against that earlier increase. It
sometimes happens that an increase to be recorded is a reversal of a previous decrease
arising on revaluation which has been charged to profit and loss statement in which case
the increase is credited to profit and loss statement to the extent that it offsets the
previously recorded decrease.

14. Retirements and Disposals

14.1. An item of fixed asset is eliminated from the financial statements on disposal.

14.2. Items of fixed assets that have been retired from active used and are held for
disposal are stated at the lower of their net book value and net realizable value and are
shown separately in the financial statements. Any expected loss is recognized
immediately in the profit and loss statement.

14.3. In historical cost financial statements, gains or losses arising on disposal are
generally recognized in the profit and loss statement.

14.4. On disposal of a previously revalued item of fixed asset, the difference between net
disposal proceeds and the net book value is normally charged or credited to the profit and
loss statement except that, to the extent such a loss is related to an increase which was
previously recorded as a credit to revaluation reserve and which has not been
subsequently reversed or utilized, it is charged directly to that account. The amount
standing in revaluation reserve following the retirement or disposal of an asset which
relates to that asset may be transferred to general reserve.

15. Valuation of Fixed Assets in Special Cases

15.1. In the case of fixed assets acquired on hire purchase terms, although legal
ownership does not vest in the enterprise, such assets are recorded at their cash value,
which if not readily available, is calculated by assuming an appropriate rate of interest.
They are shown in the balance sheet with an appropriate narration to indicate that the
enterprise does not have full ownership thereof.

15.2. Where an enterprise owns fixed assets jointly with other (otherwise than as a
partner in a firm) the extent of its share in such assets, and the proportion in the original
cost, accumulated depreciation and written down value are stated in the balance sheet.
Alternatively the pro rata of cost of such jointly owned assets is grouped together with
similar fully owned assets. Details of such jointly owned assets are indicated separately in
the fixed assets register.

15.3 Where several assets are purchased for a consolidated price, the consideration is
apportioned to the various assets on a fair basis as determined by competent valuers.

16. Fixed Assets of Special Types

16.1.Goodwill, in general, is recorded in the books only when some consideration in
money or money’s worth has been paid for it. Whenever a business is acquired for a price
(payable either in cash or in shares or otherwise) which is in excess of the value of the net
assets of the business taken over, the excess is termed as goodwill. Goodwill arises from
business connections, trade name or reputations of an enterprise or from other intangible
benefits enjoyed by an enterprise.

16.2 As a mater of financial prudence, goodwill is written off over a period. However,
many enterprises do not write off good will and retain it as an asset.

16.3. Patents are normally acquired in two days: (1) Purchase, in which case, patents are
valued at the purchase cost including incidental expenses, stamp duly, etc and (ii) by
development within the enterprise, in which case, identifiable costs incurred in
developing the patents are capitalised. Patents are normally written off over their legal
term of validity or over their working life, whichever is shorter.

16.4. Know-how in general is recorded in the books only when some consideration in
money or money’s worth has been paid for it. Know-how is generally of two types:

(i) relating to manufacturing processes and

(ii) relating to plans, designs and drawings of buildings or plant and machinery.

16.5. Know how related to plans, designs and drawings of buildings or plant and
machinery is capitalized under the relevant asset heads. In such cases, depreciation is
calculated on the total cost of those assets, including the cost of the know-how
capitalized. Know-how related to manufacturing processes is usually expensed in the year
in which it is incurred.

16.6 Where the amount paid for know-how is a composite sum in respect of both the
types mentioned in para 16.4., such consideration is apportioned amongst them on a
reasonable basis.

16.7. Where the consideration for the supply of know-how is a series of recurring annual
payments as royalties, technical assistance fees, contribution to research etc, such
payments are charged to the profit and loss statement each year.

17. Disclosure

17.1. Certain specific disclosures on accounting, for fixed assets, are already required by
Accounting Standard I on ‘Disclosure of Accounting Policies’ and Accounting Standard
6 on ‘Depreciation Accounting’.

17.2. Further disclosures that are sometimes made in financial statements include:
 (i) gross and net book values of fixed assets at the beginning and end of an
accounting period showing additions, disposals, acquisitions and other
movements;
(ii) expenditure incurred on account of fixed assets in the course of construction
or acquisition; and
(iii) revalued amount substituted for historical cost of fixed assets, the method
adopted to compute the revalued amounts, the nature of any indices used, the
year of any appraisal made, and whether an external valuer was involved in
case where fixed assets are stated at revalued amounts.

ACCOUNTING STANDARD

(The Accounting Standard comprises para 18 to 39 of this Statement, The Standard

should be read in the context of paras 1 to 17 of this Statement and of the Preface to the
Statements of Accounting Standards)

18. The items determined in accordance with the definition in para 6.1 of this statement
should be included under fixed assets in financial statements.

19. The gross book value of a fixed asset should be either historical cost or a revaluation
computed in accordance with this standard. The method of accounting for fixed assets
included at historical costs is et out in paras 20 to 26; the method of accounting of
revalued assets is set out in paras 27 to 32.

20. The cost of a fixed asset should comprise its purchase price and any attributable cost
of bringing the asset to its working condition for its intended use, Financial costs relating
to deferred credits or to borrowed funds attributable to construction or acquisition of
fixed assets for the period upto the completion of construction or acquisition of fixed
assets should also be included in the gross book value of the asset to which they relate.
However, the financing costs (including interest) on fixed assets purchased on a deferred
credit basis or on monies borrowed for construction or acquisition of fixed assets should
not be capitalized to the extent that such costs relate to periods after such assets are ready
to be put to use.

21. The cost of a self-constructed fixed asset should comprise those costs that relate
directly to the specific asset and those that are attributable to the construction activity in
general and can be allocated to the specific asset.

22. When a fixed asset is acquired in exchange or in part exchange, for another asset, the
cost of the asset acquired should be recorded either at fair market value or at the net book
value of the asset given up, adjusted for any balancing payment or receipt of cash or other
consideration. For these purposes fair market value may be determined by reference
either to the asset given up or to the asset acquired, whichever is more clearly evident.
Fixed asset acquired in exchange for shares or other securities in the enterprise should be
recorded at its fair market value, or the fair market value of the securities issued,
whichever is more clearly evident.

23. Subsequent expenditures related to an item of fixed asset should be added to its book
value only if they increase the future benefits from the existing asset beyond its
previously assessed standard of performance.

24. Material items retired from active use and held for disposal should be stated at the
lower of their net book value and net realizable value and shown separately in the
financial statements.

25. Fixed asset should be eliminated from the financial statements on disposal or when no
further benefit is expected from its use and disposal.

26. Losses arising from the retirement or gains or losses arising from disposal of fixed
asset, which is carried at cost, should be recognized in the profit and loss statement.

27. When a fixed asset is revalued in financial statements, an entire class of assets should
be revalued, or the selection of assets for revaluation should be made on a systematic
basis. This basis should be disclosed.
28. The revaluation of financial statements of a class of assets should not result in the net
book value of that class being greater than the recoverable amount of assets of that class.

29. When a fixed asset is revalued upwards, any accumulated depreciation, existing at the
date of the revaluation, should not be credited to the profit and loss statement.

30. An increase in net book value arising on revaluation of fixed assets should be credited
directly to owners’ interests under the head of revaluation reserve, except that, to the
extent that such increase is related to and not greater than a decrease arising on
revaluation previously recorded as a chare to the profit and loss statement, it may be
credited to the profit and loss statement. A decrease in the net book value arising on
revaluation of fixed asset should be charged directly to the profit and loss statement
except that to the extent that such a decrease is related to an increase which was
previously recorded as, credit to revaluation reserve and which has not been subsequently
reversed or utilized, it may be charged directly to that account.

31. The provisions of paras 23.24 and 25 are also applicable to fixed assets included in
financial statements at a revaluation.

32. On disposal of a previously revalued item of fixed asset, the difference between net
disposal proceeds and the net book value should be charged or credit to the profit and loss
statement except that to the extent that such a loss is related and which has not been
subsequently reversed or utilized, it may be charged directly to that account.

33. Fixed assets acquired on hire purchase terms should be recorded at their cash value,
which if not readily available, should be calculated by assuming an appropriate rate of
interest. They should be shown in the balance sheet with an appropriate narration to
indicate that the enterprise does not have full ownership thereof.

34. In the case of fixed assets owned by the enterprise jointly with others, the extent of
the enterprise’s share in such assets, and the proportion of the original cost, accumulated
depreciation and written down value should be stated in the balance sheet. Alternatively,
the pro rate cost of such jointly owned assets may be grouped together with similar fully
owned assets with an appropriate disclosure thereof.

35. Where several fixed assets are purchased for a consolidated price, the consideration
should be apportioned to the various assets on a fair basis as determined by competent
valuers.

36. Goodwill should be recorded in the books, only when some consideration in money
or money’s worth has been paid for it. Whenever a business is acquired for a price
(payable in cash or in shares or otherwise) which is in excess of the value of the net assets
of the business taken over, the excess should be termed as ‘goodwill’.

37. The direct costs incurred in developing the patents should be capitalized and written
off over their legal term of validity or over their working life, whichever is shorter.
38. Amount paid for know-how for the plans, layout and designs of buildings and / or
design of the machinery should be capitalized under the relevant asset heads, such as,
buildings, plant and machinery etc. Depreciation should be calculated on the total cost of
those assets, including the cost of the know-how capitalized. Where the amount paid for
know-how is a composite sum in respect of both the manufacturing process as well as
plans, drawings and designs for buildings, plant and machinery, etc., the management
should apportion such consideration into two parts on a reasonable basis.

Disclosure

39. The following information should be disclosed in the financial statements:

(i) gross and net book values of fixed assets at the beginning and end of an
accounting period showing additions, disposals, acquisitions and other
movements;
(ii) expenditure incurred on account of fixed assets in the course of construction
or acquisition; and
(iii) revalued amount substituted for historical costs of fixed assets, the method
adopted to compute the revalued amounts, the nature of indices used, the year
of any appraisal made, and whether an external valuer was involved, in case
where fixed assets are stated at revalued amount.
CHART OF ACCOUNTS
Accounting Manual For Urban Local Bodies

Chart of Accounts with code nos. Accounts Heads and Descriptions Therefor

1000. INCOME
INTRODUCTION:

1. The Income Accounts are designed to show the revenue earnings generated by the
Urban Local Bodies from various sources, such as,

(i) Taxes
(ii) Licence fees
(iii) Income from properties
(iv) Assigned revenue
(v) Service charges
(vi) Grants and contributions
(vii) Sale and hire charges
(viii) All income relating to Water Supply & Drainage Fund
(ix) Other income

2. The balances in the individual ‘Account Heads’ (as per the General Ledger) should be
transferred to the credit of income account, while, the closing of accounts is being done at
the end of the financial year.

3. It should be clearly noted that LOANS received for various CAPITAL WORKS,
PROJECTS and SCHEMES, and CAPITAL GRANTS and CONTRIBUTION for
specific projects are to be accounted for, under CAPITAL FUND for which separate code
numbers are provided.

4. The code numbers (1001 to 1999) have been assigned here, for all items of Income.

5. The Departments / Sections in the Municipality have been given with ALFA codes
(two letters) to identify them distinctly. This has been explained under chapter ’01.
Introduction’ in the Accounting Manual – Volume I.

6. The prefix ‘RF’ should be used in all documents for the items of Income under
Revenue Fund. The prefix ‘WS / SF / ED / EE’ should be used whenever an item of
income relates to the Water Supply & Drainage / Sewage Farm / Education / Elementary
Education respectively.
For eg, if an item of revenue is received under ‘Other Income’, of Revenue Fund, this
should be accounted for, with prefix RF1045 and with prefix WS1045 when it relates to
Water Supply & Drainage. Thus, though the code is common to both, it should be
classified with reference to the prefix used.

Account Account Head Description

Code no.
1001 Property Tax for (i) Gross Demand LSS other specific revenue
General purposes (Water Supply and Drainage Tax, Education Tax
and Library cess) should be credited to this
Account, with a corresponding debit to code No.
3002 – Property Tax – Recoverable – Current.
(ii) There is no need to segregate Scavenging Tax
and Lighting Tax, and they should be grouped
with Tax for General purposes as one item as
these tax items are meant for services and as no
self sufficiency for them is aimed at.
(ii) Credit to this account should be raised
immediately at the beginning of the half year,
based on the previous half year demand, first in
the month of April and second in the month of
October. Besides credit should be aised monthly
as soon as the monthly lists for new assessments
and enhancements are finalized and also when
final orders on appeal are passed, through a GJV
based on Property Tax Adjustment slips (MCF
11)
(iv) Chalans (MCF1) printed in TRIPLICATE for
remitting Property Tax clearly indicae the
account code numbers.
(v) As and when collections are made, the amount
already debited to code no. 3002, will get reduced
to that extent, in view of the fact that the other
components of property tax were already credited
to the respective fund accounts. But, in respect of
collections towards Water supply & drainage tax
and Education tax, the amounts collected through
cheques initially credited to the respective TAX
PAYABLE accounts are cleared, when actual
transfers are made to the respective TAX
Accounts (WS3013 & EE3016) The daily cash
collections of these taxes are accounted for in
these fund accounts.
1002 Water Supply and (i) A component of the Property Tax that should
Drainage Tax be separately accounted for in this head of
 account.
(ii) Credit to this Account through G.J.V. should
be raised as indicated in sub para (iii) of
description against Code no. 1001,
simultaneously when credit is given under code
no. 1001.
(iii) In the chalan prescribed in triplicate, code no.
3013 is specifically indicated after Code no.
3002, so as to enable the Shroff the properly and
easily account for the collection under this head.
(iv) In respect of collections through cheques, the
Accounts Cell should, as soon as the General
Ledger for a month is posted, transfer the credit
balance available in the code no. 4041 to a
separate Fund Account called ‘Water Supply and
Drainage Fund’ by cheque, by preparing a BPV.

4041 – (1) Water Supply and

Drainage Tax payable A/c Dr
To bank Account Cr
1003 Education Tax (i) A levy of Tax as an addition to the Property
Tax under the relevant Act that should be credited
to this head of account.
(ii) Credit to this account should be raised
monthly, by debiting to code no. 3016 through a
G.J.V. simultaneously when credit is given for
account code nos. 1001 and 1002.
(iii) In the chalan prescribted in TRIPLICATE for
collecting property Tax, code no. 3016 is
specifically given so as to enable the Shroff to
properly and easily account for the collection
under this head.
(iv) In respect of collections through cheques, the
Accounts Cell should, as soon as the General
Leger for a month is posted, transfer the monthly
collection to the Elementary Education Fund, by
cheque by passing the following entry in the
B.P.V.

4042 – (1) Education Tax

Payable A/c Dr
To Bank A/c Cr

1004
1005 Excess Remittance – When the property tax collections are analysed,
(Collection) Property there are possibilities of clear cases of excess
 Tax and other Revenue collections of trivial amounts warranting neither
items refund nor adjustment to subsequent half year
Tax, treated as ‘deferral’. After accounting for the
Tax due, (out of the Tax collected) under the code
nos. 3002, 3013, 3016 and 4043, the excess
collection, if any is to be accounted for, here. If
there is no case of excess collection, this account
head needs no operation. The excess collection
under other items of revenue should also be
accounted here.
1006 Profession Tax Profession Tax collected and due (left uncollected
for the current year) is accounted for, here
1007 Pilgrim tax The Tax is received from Railways and the
amount booked on actual basis
1008 Tax on Carriages and (i) Tax collected under this account is accounted
Animals here. The tax is payable on half yearly basis.
(ii) When the demand is finalized, every half
year, credit is given to this account, twice a year
through a G.J.V.
1009 Tax on Carts Descriptions as above
1010 Servant Tax This is collected in Municipalities in hilly areas
as per the District Municipalities Act
1011 Advertisement Tax Advertisement Tax collected under the provisions
of the Act
1012
1013
1014
1015
1016 Fees under Places of Self explanatory
Public Resorts Act
1017 Trade Licence Fees All collections of licence fees relating to the issue
of Licences to ‘Licenceable Trades’ as well as
fees for renewal of old Licences during the
current year. The licence fee collected in a year is
the amount due to be collected for the year in
which it is collected, though the issue of licences
is for the next year. It includes installation fees.
The additional fee collected towards belated
payment of Licence fees shall also be booked
here.
1018 Licence Fees under The description against code no. 1017 is equally
PFA Act applicable here.
1019 Building Licence Fees All collections relating to the fees for the issue of
Building permits to the owners for construction of
new buildings or extension or alteration of
existing buildings, shall be accounted here. This
 will include the Planning Permission fee at the
prescribed percentage, site approval fees i.e. Lay
out approval fees and renewal fees for renewing
the Building Licence.
1020 Encroachment Fees Fees of unobjectionable encroachments on street
margin as decided by Council. This includes
temporary Festival Pandal and Summer Pandal.
1021 Parking Fees The fees collected in the notified parking areas
for vehicles either by lease or departmental
collection
1022 Market fees – Daily Credit should be raised at the beginning of the
market year through a GJV on the strength of the
Council’s resolution confirming the lease amount
for the accounting year. The initial deposit
representing three or four monthly instalments of
the lease amount collected in advance, shall be
accounted for, under Deposit Account in code no.
4018 and the monthly instalment collected will be
brought under Code no. 3011, since credit was
already given to this head of account through a
GJV on confirmation of lease with a simultaneous
debit to code no. 3011. For the last three or four
months’ instalments, the amount in the deposit
will be adjusted by means of a FJV. ‘Penal fees’
collected for belated payment of monthly
instalments, if any, will be classified under the
head ‘Other Income’ in coden o. 1045. This will
include collection of fees from vendors and daily
collection by the Revenue Assistants from those
selling temporarily for a short duration of time
i.e. for 2 or 3 hrs within the market
1023 Market Fees – Weekly -do-
Market
1024 Private Market Fees The periodical collections of fees from all private
markets.
1025 Advertisement Fees The lease amount collected as fixed by the
Council for advertising on Lamp Posts and
Hoardings erected within the Municipal Limit
credit will be raised in this account at the
beginning of the year by a GJV with a
corresponding debit to code no. 3011
1026 Fees for Bays in Bus The fees called Bus stand fees, Vendor’s fees and
stand collections for cloak room, collected either by
lease or by departmental collection. In respect of
lease confirmed by the Council, credit should be
raised at the beginning of the year by a GJV with
 a corresponding debit to code no. 3011
1027 Fees for Slaughter The fees will be collected either by lease or
Houses departmental collection. In respect of lease
confirmed by the Council, the accounting
treatment is the same as in code no. 1022
1028 Cart stand / Lorry stand Cycle stand fees / Lorry stand fees / Taxi stand
/ Taxi stand fees fees. In respect of the lease confirmed by the
Council, the accounting treatment is the same as
on code no. 1022.
1029 Survey fees (1) The amount remitted in the Municipal
Treasury, towards
(a) Field line fees
(b) Sub division fees (1/3rd share of these two
items payable to the Govt) and
(c) Fees for giving extracts of survey field
register and sketch or commonly called
Patta certificate (full amount to the
municipality)
(2) The 2/3rd of the fees collected for the first two
items, in the Taluk Office for the areas falling
outside the municipal limits, but coming within
the town survey limit, should be obtained from
the local Asst. Director of survey and land
records, by raising a demand.
(3) The amount receivable from / payable to the
Govt. should be calculated at the end of each
financial year and shown under Assets or
Liabilities till the eventual receipt or payment as
per the agreed sharing pattern.
(4) Action should be taken either to get the
amount due from the Survey department of the
Govt. or to pay the amount to the Govt, with
reference to the statement prepared as specified
above in Sl no. 3
1030 Cinema Theatre - All income including entrance fees, parking fees,
Income fees for screening slides, hoardings, snack bars
etc
1031 Development charges Charges collected along with building licence
fees, for development of roads, provision of street
lights etc in approved and unapproved layouts.
1032 Fees for Fishery Rights Lease of the right to fishing in lakes / ponds
belonging to the Municipality. The accounting
treatment is the same as in code no. 1022
1033 Rent on and Lease of Income from Vacant lands let out for conduct of
Lands Exhibitions, Circus, Dramas etc, and from the
Produce of Lands (Sewage farm) if any. This also
 includes rent for the land on which hoardings
erected, rent for maidan for conducting public
meetings and lease of Sewage farm used for
cultivation, lease of lands in the Water reservoir
for plantation cultivation and other cultivation. In
respect of lease confirmed by the Council the
accounting treatment is the same as in code no.
1022
1034 Income from Ferries Self explanatory
1035 Income from Fairs & The contributions received from temples on the
Festivals notified Fairs & Festivals.
1036 Rent on shopping The monthly rent fixed on allotment of shops in
complex shopping complex, shops in regular markets etc.
The rent due for a year should be assessed at the
beginning of the year and credit is given to this
code no. with a corresponding debit to code no.
3017 by a GJV.
1037 Rent for Community The rent fixed and collected for hiring of
Hall Community halls, kalai arangam, Kalyana
mandapams including cleaning charges and hire
charges for furniture, town hall etc.
1038 Rent on buildings The monthly rent recovered from pay bills of
staff and officers for occupation of quarters
including ICDS buildings.
1039 Fees for pay and use The amount collected either by lease or by
toilets departmental collections. Regarding lease the
accounting treatment is the same as in code no.
1022
1040 Rent from Travellers Self explanatory
Bungalows and Rest
houses
1041 Road cut-Restoration The amount collected on the application for new
charges water supply pipe line / drainage connections
includes road cut restoration charges. This should
be collected through a separate chalan to account
for, under this code
1042 Avenue receipts All income earned on lease or auction of
usufructs of Avenue trees etc
1043 Demolition charges for The amount collected as ‘building service
unauthorized charges’ for removal of debris left heaped on the
constructions and road / streets at the time of construction shall be
building service accounted here. Where notice given, for
charges demolition of unauthorized construction is
ignored by the concerned party, the cost for
demolition by the Municipality itself, that is
collected, will be accounted here. The ‘charge’
 will include the one i.e. collected for debris
removal in front of the houses that are kept
accumulated by the house owners deliberately. In
case of refund this account shall be debited.
1044 Other fees Distraint and warrant fees, fees for cremation and
RF burial, electrical crematoria, compounding fees,
fees for removing encroachments, septic tank
cleaning charges, fees for registration of
contractors the renewal fees collected from them,
surveyor licence fee and the renewal fees from
them, fees for name Transfer in the Property Tax
Demand Register, Charges for collecting the used
lease for meals / tiffin in Kalyana mandapams,
hotels, restaurants etc.
1044 Other fees Fees collected for issuing licence to the private
WS plumbers and the renewal fees. Fees collected for
Name Transfer of Water Supply and Drainage
connections in the Demand register.
1045 Other income Cost of tender schedules, printed forms issued at
the Information Centre levy of charges for belated
payment of monthly instalment of lease amount
for weekly /daily market, belated remittances of
rent on shops in shopping complex, rent for clas
rooms for conducting examinations, fees
collected for film shooting, rent for the carts to
carry dead bodies and all other income which are
not classified under any specific head of income,
have to be accounted here. The electricity charges
collected from the parties who occupied the
Kalyana mandapams, Electricity charges
collected from the organizers of public meetings
held on Municipal Maidans shall also be booked
here
1046 Duty on Transfer of The duty on transfer of Property actually received
Property during the year, will be accounted in this head
1047 Entertain-ment Tax The Entertainment Tax actually received from the
Govt will be accounted in this head
1048 Magisterial Fines The actual amount received in this head
1049 Compensation for Toll -do-
1050 Assigned Revenue The actual receipt of the apportionment of Sales
tax, if any (assigned by commercial Tax
department)
1051 Grant for natural Amount received or reimbursement of
calamities expenditure incurred on provision of food, shelter
during flood, fire etc
1052 Grants for Schemes The grants for implementation of various
 Implementation schemes such as Maternity and Child welfare,
Anti-Malaria, Anti-Filaria etc, and grant received
under Elementary Education Fund
1053 Devolution Fund The actual amount received with reference to
(including State Govt order under the scheme of Financial
Finance Commission Devolution from the state Govt. This includes the
Fund) actual amount transferred to the Water supply &
Drainage Fund and also amount covered by
adjustment towards Municipal Employees,
Pension fund, Employees Pension Fund, Audit
fees etc, which will be brought to account through
a GJV.
1054 Copy application fees Fees for extract of Birth and Death registration
register, fee for property tax demand abstract etc
1055 Penalty and Bank The bank charges as debited by the bank and the
charges for penalty amount as fixed by the council, collected
dishonoured cheques from the tax payer for the dishonour of cheque
given by him towards tax and other dues
inclusive of those relating to other funds.
1056 Law charges and court Amounts recovered from the parties for the
cost recoveries expenses incurred by the Municipality towards
stamp duly etc, as informed by the lawyer and the
cost recovered through the court will be
accounted in this head. The court cost will
comprise of tax amount or any other item of
revenue covered by suit and the expenses
incurred towards court cost. They have to be
segregated and accounted accordingly
1057 Profit in Sale of Assets (Out of sale proceeds, cost would be adjusted
under ‘ASSET ACCOUNT’ and the balance, if
any, booked under this account head)

This account relates to the difference between the

net realized value on the disposal of the asset of
the Municipality and the net book value at the
time of sale.
1058 Hire charges Rent realized on letting out the tools and plant of
the Municipality like road rollers
1059 Sale of rubbish / debris The amount collected towards sale of rubbish
/ Silt debris and silt removed from Sewage Farm
1060 Sale of compost Self explanatory
manure
1061 Sale of stock & stores Amount realized from the disposal of
unserviceable store items which are obsolete or
unusable under all funds
1062 Sale of scraps Amount received from the disposal of scrap
 materials accumulated in various departments of
the municipality mainly workshops, printing
presses, Bullock carts, bulls etc.
1063 Sale of products Revenue items generated out of the sale proceeds
of pots and plants in various parks and gardens
and other products manufactured mainly with an
intention to sell them on competitive rates. It
includes sale of grass and usufructs collected
from the Sewage Farm.
1064 Receipts from Amount by way of collecting any fee or other
Hospitals and charges for the services rendered and other
Dispensaries recoveries made in Hospitals and Dispensaries.
1065 Pension and leave The pension and leave salary contribution
salary contributions collected from the other institutions / Govt. on
behalf of employees deputed on foreign service
terms.
1066 Miscellaneous All recoveries ordered by the Commissioner or
recoveries the Authorised Officers in one lumpsum or in
monthly instalments through pay bills, towards
shortages in stock account, unauthorized or
irregular issues, pilferage, recoveries of excess
payment made to the contractors etc, have to be
given credit to this account, by debiting the
amount to code no. 3072 for recovery in one
lumpsum or in instalments and for crediting to the
same head of account.
1067 Interest on investments Interest received on various fixed deposits and
/ Fixed Deposits other types of deposits held by TNEB, Telephone
department etc.
1068 Interest from Bank Any interest as per Bank credit advice and a
credit entry for interest given in the Bank Scroll
will be booked by preparing a BRV
1069 Projects – Overhead This is an adjustment entry by which ‘receipts’
Appropriation are shown here, by preparing journal voucher
Expenses (G.J.V/F.A.J.V) while reckoning the cost of
projects annually. A specified percentage is to be
computed on the direct cost of all capital schemes
– direct cost is arrived at, after paying to the
contractor and supplier who executed a project in
the financial fear towards personnel cost on
administration and supervision. The amount so
computed or a percentage prescribed (now 11%
adopted) should be credited to this account head
and corresponding debit given to ‘the projects –
in – progress’ account head. Detailed information
are also given under the chapter on ‘Projects and
 Fixed Assets Accounting’ – Vol I of the
Accounting Manual. In as much as the personnel
cost of the engineering staff and the
administrative staff could not be precisely worked
out and charged to the individual projects, this
notional account is to be operated.
1070 Projects – Overhead Interest on projects during the execution period of
appropriation - Interest a Capital Scheme is to be booked to such projects
executed out of loans. This exercise will be
carried out annually and the amount of such
interest will be debited to ‘Projects – in Progress’
(i.e. this amount will be added to the project cost)
head of account and the same amount taken credit
to this account.
Interest on loans for such projects is paid from
REVENUE FUND.

So the interest as indicated below is worked out

and added to the project cost.

Interest cost =
(Cumulative construction cost + half of the
construction upto the beginning of the year cost
in this year) * Rate of interest of loan
1071 Interest on staff Interest due on staff advances at the prescribed
advances rates and instalments on various interest – bearing
advances (Marriage advance, Conveyance
advance etc) as worked out, will be credited to
this accounts by raising demand in code no. 3047
for future recovery to be credited to this account
1072 I.P.P. – V Grant Self explanatory
1073 Deposits forfeited Deposits received from contractors, suppliers and
other outsiders that have been forfeited for
various reasons are to be treated as Income and
the amount taken is credited to this account. This
exercise is done after establishing that the
Municipality need not refund such deposits. In
other words, an order forfeiting the deposit has to
be issued and a copy marked to the Accounts cell
for proceeding further to take action on the above
lines.
1074 Deposits lapsed The deposit amounts that are kept in the Deposit
Register for a reasonable time, are found to be not
claimed by the depositors, with proof of
remittance of the amounts even after the
prescribed period of the purposes for which they
 have been paid. In such cases, the deposits may
be lapsed and taken as revenue of the
Municipality, by making entries in the Register or
Lapsed Deposits.
Ofcourse, if any claim is received for the amounts
lapsed and entered in the Register of Lapsed
Deposits, subsequently with adequate proof, the
same may be entertained and the amount paid
with the specific sanction of the council and the
amount debited to account code no. 2030.
1075 Dividend on shares The dividend as and when declared and paid on
the shares held by TUFIDCO or any other
financial institution in which shares are taken on
the instructions from the Govt shall be booked
here
1076 Insurance claim The amount received from the Insurance
amount company on claim for the death of bull covered
by Insurance scheme and for vehicles insured for
accident coverege
1077 Rent on Bund Stalls Lease amount (monthly rent) received from the
occupiers of the bunks letout on lease
1078 Garden / Parks - Any amount fixed by the council towards entry
Receipts and for the amusements provided in the Garden /
Parks maintained by the Municipality
1079 Income from road Any amount fixed by the council and collected
margins from the hawkers selling cosmetics and other
things.
1080 Drainage fees from The amount collected towards providing
building/float Drainage to the new building at the time of issue
promoters of building plan permission
1081 Initial amount for new Fixed amount remitted by house owners for
water supply / drainage getting new house service connections for water
connections supply and drainage. As repayment of initial
deposit is only hypothetical, the same shall be
treated as income without corresponding liability.
As repayment of initial deposit is only
hypothetical, the same shall be treated as income
without corresponding liability. This amount
should be remitted in a separate Bank Account
(code no. 3140) with periodical investment in
fixed deposit. This amount should be utilized for
execution of Capital Expenditure, Debt Servicing
and for carrying out major repair.
1082 Water Supply The cost of application form, centage charges
Connection charges collected for inspection / supervision and for
labour, recoveries towards the material supplied,
 repair charges etc have to be accounted here
1083 Metered / Tap rate The income towards charges for providing water
water charges through water taps (Tap rate and metered rate).
The demand raised through G.J.V. should be
accounted here
1084 Charges for Water The income earned by supplying water through
Supply through lorries lorries on payment of cost
1085 Septic tank cleaning Wherever there is drainage scheme and wherever
charges the septic tank cleaning work is undertaken the
charges collected will be credited to this account
1086 Sewerage connection The cost of application form, centage charges,
charges repair charges and other charges collected for
providing new sewerage connections where the
system is available
1087 Specific maintenance The receipt of specific maintenance grant from
Grant – contribution for the Government or contribution from any other
Water Supply and organization for water supply and drainage work /
Drainage scheme is booked here.
1088 Prior year Income Any income that has not been accounted for in
the respective years nor forseen but received in
the current year, will be booked in this account

2000. EXPENDITURE

INTRODUCTION:

Expense Accounts are so designed as to ascertain the expenditure on monthly basis and
annual basis, department wise and also activity wise, with a view to identify easily the
expenditure for a specific purpose or activity. Annually, the balances in the detailed
accounts of the expenditure as per the General Ledger will be shown on the debit side of
the Income and Expenditure account.

2. Accordingly, the revenue expenditure are classified functionally under the following
broad departmental heads, with Alpha codes as indicated below.

01. REVENUE DEPARTMENT -RE

02. ACCOUNTS CELL -AC
03. GENERAL DEPARTMENT -GD
04. COUNCIL -CL
05. ENGINEERING DEPARTMENT -EN
06. –do- WORKSHOP -EW
07. –DO- PARKS & LIGHTS -PG
08. –DO-STREET LIGHTS -SL
09. –DO- STORES -ST
10. TOWN PLANNING DEPARTMENT -TP
11. PUBLIC HEALTH DEPARTMENT -PH
12. CONSERVANCY -CN
13.SOLID WASTE MANAGEMENT -SW
14.HOSPITALS & DISPENSARIES -HD
15. MATERNITY & CHILD WELFARE -MC
16. ANIT-MALARIA SCHEME -AM
17.ANTI-FILARIA SCHEME -AF
18. I.P.P - V/ FAMILY WELFARE -FW
19.ANIMAL HUSBANDRY -AH
20. TAXATION APPEALS COMMITTEE -TC
21. EDUCATION -ED
22. ELEMENTARY EDUCATION -EE
23. ZONAL OFFICE – 1 -ZA
24. -do- -ZB
25. -do- -ZC
26. -do- -ZD
27. -do- -ZE
28. -do- -ZF and so on.
29. WATER SUPPLY AND DRAINAGE -WS
FUND
30. SEWAGE FARM -SF

3. Wherever Zonal offices are ordered to function and the Zonal officers are Drawing and
Disbursing officers, such offices will be identified with ALPHA CODES and the officers
are allowed to operate with the same Account Code nos. as in the case of officers in the
main office, with prefix ‘ZA’ and so on.

4. Similarly in the case of utilization of the Devolution Fund, on authorized items, the
code nos. are to be prefixed with the letter ‘DV’ additionally. This will enable to prepare
a separate statement of receipts and payments for this Fund.

5. The Water Supply and Drainage Fund Account is to be maintained separately. In order
to keep this account distinct, the code numbers have been assigned with prefix ‘WS &
SF’.

6. The following code nos. are common to all departments/sections/zonal offices etc, and
they should be used with prefix assigned to each of them. Separate code nos. have been
given for those items of expenditure which are directly applicable to the respective depts./
sections etc.

2001. Pay including personal pay

2002. Special pay
2003. D.A.
2004. Interim relief
2005. H.R.A.
2006. C.C.A.
2007. Cash allowance
2008. Conveyance allowance
2009. Medical allowance
2010. Other allowances
2011. Ex-gratia / Bonus
2012. Travel expenses
2013. Leave Travel concession
2014. Supply of uniforms
2015. Telephone charges
2016. Light vehicles maintenance
2017. Legal expenses
2018. Stationery and printing
2019. Advertisement charges
2020. Other expenses
2025. Conveyance charges
2041. Prior year expenses
2046. Books & Periodicals and magazines
2047. Postage and telegrams
2048. Electricity consumption charges
2049. Office building maintenance
2050. Repairs and maintenance of tools and plant
2051. Training programme expenses
2052. Professional charges
2053. Pension and leave salary contributions
2055. Staff welfare expenses
2070. Heavy vehicles maintenance
2107. Cost of medicines
2108. Rent for buildings

Note: 1. In the journal vouchers, all details required for classification and
payments should be furnished in the column provided for ‘Narration’.
2. All claims for payments are to be supported by bills / invoices etc
3. In the pay bills, the seal bearing BPV no. and EJV no. with date in which they
are passed for payment has to be affixed and attested by the Accountant /
Accounts officer
4. All pay bills including supplemental are to be supported by abstract of salaries
and supplemental bills. (MCF 16)
Account Account Head Description
code no.
2001 - PAY, DA, etc These accounts are for the gross salaries
2011 payable to all the officers and staff members
in each department, jeep / car drivers as per
the sanctioned strength. Details in EJVs are to
be given in individual code nos. with
departmental prefix nos. Till computer
operation comes into being, it is better if the
postings are made code wise for 2001-2011 in
the General Ledger and also shown in the
Trial Balance
2012 Travel expenses The expenses on traveling allowance for the
discharge of official duties by the officers and
the staff of respective department outside the
jurisdiction of the local body. The name of the
officer, period of claim etc have to be
furnished in the EJV
2013 Leave travel The expenses on the grant of LPC to the
concession eligible employees and their family members
as per the procedure prescribed therefor. The
claim should be supported by the proceedings.
2014 Supply of uniforms The expenditure on supply of uniforms to the
eligible employees as per the scale prescribed
by the Govt. The period for which and the
scale at which supply was made should be
furnished. It includes stitching charges
2015 Telephone charges The payment of telephone charges for the
telephones provided in the office and for the
officers in their residences. The narration in
the EJV should indicate the location, to whom
provided (the designation of the officer),
period etc should be furnished
2016 Light vehicles Cost of petrol/diesel, repairs and
maintenance replacements, payment of MVT etc, for the
vehicle or the jeep allotted in the respective
depts. Vide also code no. 2070 for further
descriptions. If the cost of repairs on any
vehicles exceeds 10% of its original cost at
any one time, the same should be capitalized
as it enhances the working condition of the
vehicle
2017 Legal expenses 1. All kinds of legal expenses that are
incidental to the respective depts
2. Request from the advocate, case file no.,
 amount paid previously have to be furnished
2018 Stationery & The cost of forms and registers either
printing purchased or printed, the purchase of
stationery articles etc by the general dept that
are meant for use by all depts. should be
booked to the G.D. Besides the cost of forms
and registers specially used in respective
depts., and purchase of stationery items that
are exclusively required for those departments
should be booked to the department
concerned with the prefix applicable to the
depts.
This will include Xeroxing, binding etc
Note:
Purchase of hi-tech pens / ball point / ink pens
/ for individual officers’ use is not permissible
2019 Advertisement All advertisement charges relating to the
charges depts. concerned
2020 Other expenses Any other expenses not classified elsewhere
which are of rare and unusual nature have to
be booked. This code could be used very
sparingly to accommodate special nature of
expenses
2021 Property Tax – Remission in the Property Tax granted as and
Vacancy Remission when individual cases are decided and orders
passed.
Debit entry is raised through a G.J.V. based
on the Property Tax Adjustment Slip
(MCF14) duly crediting the property tax
recoverable account – current / arrears for this
transaction.
2022 Provision for The major dues to be collected in the
doubtful collection Municipality would relate to Property Tax
of revnue items recoverables. Out of the total amount due, it is
likely that a certain portion might prove to be
doubtful of realization, if they have become
barred by limitation of time or for any other
reason. There may also be cases of certain
other items of revenue, the collection of
which being impossible in due course of time.
To meet this contingency, a provision has to
be made under this account at the end of
every Accounting year. The provision would
be determined on a percentage basis on the
total outstandings. The year’s provision will
be shown under this head and cumulative
 provision will be indicated in code no. 4039.
2023 Irrecoverable As and when the irrecoverability of taxes and
Revenue items – fees and other items of revenue, established,
Written off after exhausting all measures enjoined in the
Act and the rules framed there under, such
amount would be written off, with the specific
sanction of the council. The items of revenue
covered by the above sanction will be
expunged from the respective Demand
Registers.
2024 M.O.Commission In some cases, the monthly pension subject to
(Pension) ceiling fixed by the Govt, have to be sent by
M.O. bearing the commission from Municipal
Funds. The expenditure on M.O. Commission
may be included in the cheque, while
drawing the amount of pension and the
expenditure classified accordingly.
2025 Conveyance charges All expenses connected with handing over
office letters by messengers to other offices
and for encashment of self cheques etc, will
be booked here.
2026 Computer All expenses connected with the maintenance
Operational of computes inclusive of service charges and
Expenses purchase of stationery items therefor
2027 Interest charged by Any interest debited by the Bank as per the
the bank debit advice and a debit entry given in the
Bank Scroll towards interest, will be booked
by preparing a BPV (not payable)
2028 Bank charges Any debit in the Bank Scroll should be
examined and details obtained from the Bank
before booking under this head by preparing a
BPV (not payable). This includes the charges
debited by the bank on dishonoured cheques.
The commission for collection of outstation
cheques should be recovered from the parties
concerned by watching over it.
2029 Interest on Loans / To the extent pertains commitment charges to
Ways & Means creation of assets should be capitalized under
Advance / Overdraft 3121 or 3122 till the asset is created
2030 Lapsed deposit - Where an occasion arises to refund the
refund deposits that were already taken as lapsed
deposits in accounts after the time limit was
over, that refund amount will be booked in
this head, treating it as revenue expenditure.
2031 Pension (Super Expenditure on payment of pension, family
annuation/Retiring/I pension, commuted value of pension, Death
 nvalid etc./Family cum retirement Gratuity will be booked under
Pension/ Adhoc the respective account heads. Expenditure on
pension monthly payment of pension and family
pension to the retired employees and to the
nominated family members respectively will
be booked here.
2032 Commuted value of The payment of commuted value of pension
pension otherwise knows as ‘Commutation of
pension’ on retirement
2033 Death-cum- The payment of gratuity is accounted in this
retirement Gratuity head
2034 Special Provident The management contribution as fixed by the
Fund-cum-Gratuity Govt (presently Rs.5000/- in individual cases
scheme contribution of retirement) is debitable to this account. By
prudent investment of the subscription
amount even this could be met out of that
fund
2035 Group Insurance The management contribution to be paid
scheme – periodically at the rate prescribed by the
Management Government in respect o all employees on roll
contribution in the Municipality is to be assessed and paid
to the Government Account. The contribution
due shall be worked out separately for
General Staff, Staff whose salary is paid from
Water supply & Drainage Fund and for Staff
working in Nutritious Meals centers
2036 Audit fees The audit fees payable to Government
account as demanded by the Audit
Department either by letter or by specific
mention in the audit report have to be charged
to this head as and when received.
2037 Loss on sale of asset This account relates to losses incurred while
disposing of the Municipality’s obsolete and
unserviceable assets. When the sale value is
more, the surplus is to be accounted under
code no. 1057 viz. profit in sale of assets
2038 Depreciation Depreciation on all the different types of
assets is to be accounted for at the prescribed
rates under this head by means of an E.J.V.
for transfer of this amount to the respective
accumulated depreciation account through
depreciation work sheet (MCF 370
2039 Pension Even though the pension contribution payable
contribution to to the Municipal employees Pension Fund,
Municipal maintained by the Director of Local Fund
Employees Pension Audit, is subject to adjustment out of the
 Fund amount released by the Directorate of
Municipal Administration every quarter of the
financial year under the scheme of Devolution
fund, from the state fund, the amount so
adjusted should be booked here.

As per G.O.Ms. No. 110 MA&WS(Election)

Department dated 3.5.97, w.e.f. 1.4.97. The
onus of providing for pension contribution
liability to the Pension Fund maintained by
the DLFA, rests with the Govt. Hence, no
liability code for this provided.
2040 Municipal The govt. sanction some schemes like
Contribution to National Slum Development Programme on
other Funds / 50:50 basis i.e. the Govt shall pay 50% of the
schemes scheme and the Municipality should match
with the other 50% by way of its contribution.
The Govt. grant received for such schemes
accounted under 4014 should also be
transferred to the scheme accounts
2041 Prior Year Expenses In exceptional circumstances, any expenses
which relate to prior years not paid nor
provided for earlier will be accounted under
this head. And also to identify the quantum of
such extraordinary claims settled during the
current year
2042 Hospital stoppages / The expenditure on reimbursement of hospital
reimbursement of inpatient charges other than diet charges and
medical expenses wherever reimbursement of Medical
Expenses availed by the staff will be booked
here
2043 Expenses on food Expenditure on taking food samples under the
sampling Prevention of Food Adultration Act should be
booked here
2044 Provision for Wherever Municipal properties are under
encroachment encroachment, till they are made free from
encroachment, provision has to be made as
per the recognition norm given in vol II of the
accounting manual by creating a liability in
code no. 4101
2045
2046 Books and Purchase of books for reference, purchase of
periodicals and news papers magazines etc, as per the scale if
magazines any fixed by the Govt
2047 Postage and The total expenses on the sue of postal stamps
telegrams and fax and issue of telegrams for the office as a
 charges whole are to be booked here. Fax charges also
to be booked here
2048 Electricity The electricity charges for the office building
consumption and other buildings are debitable to this head
charges for office
buildings
2049 Office building - It includes replacement of electrical, sanitary
maintenance fittings etc and general upkeep of the office
building ward offices / Divisional offices etc
2050 Repairs and The cost on repairs and replacement of the
maintenance of general items of tools and plants in all the
office furniture etc depts. such as typewriters, water coolers,
roneo / Xerox machine, tables, chairs etc
2051 Training The cost on giving training both internal and
programme - external – to the officers and staff of the entire
expenses municipality irrespective of the depts. in
which they are working
2052 Professional charges The fees paid to professionals / consultants /
technical experts engaged on contract for
formulating new schemes, preparing new
projects, master plan etc for obtaining
feasibility reports etc, Finally when a
particular project is complete, this must be
taken for assetisation
2053 Pension and leave Pension and leave salary contributions,
salary contributions payable for and on behalf of all deputationists
working in the municipality
2054 Contributions Contributions payable to the related agencies
such as CMDA / LPA, TNIUS and other
institutions. It includes contribution payable
to the chamber of municipal chairman and All
India council of Mayors.
2055 Staff welfare i) The expenditure incurred on any specific
expenses authorized welfare schemes beneficial to all
employees of the municipality
ii) The difference between the interest earned
on ‘T’ deposit account and the interest paid to
the P.F subscribers will be debited to this
head of account based on council resolution
2056 Exhibition Expenses The expenses incurred by all departments in
participating in the exhibition conducted by
the State govt / Municipality / authorized non-
Govt organsations. This includes expenditure
incurred on Flower show
2057
2058
2059
2060
2061 Sitting fees / The fees/honorarium payable at the prescribed
honorarium for the rate for the councilors for attending the
councillors and council meetings and the meetings of
meeting expenses committee and all other expenses related to
the council hall, Chairman room Mayor
chamber etc
2062 Council department Travel expenses paid to the Mayor and
– Travel expenses Deputy mayor or the chairperson and vice-
chairperson and the councilors for their
authorized journeys / tours undertaken out of
their municipal jurisdiction
2063 Expenses on The amount expended on welcome addresses
hospitality / given to the High dignitaries, reception given
entertainment to the VIPs dinner hosted by Mayor /
Chairperson etc as per the guidelines and
permission given by the State Govt
2064 Expenses on The expenses relating to laying of foundation
opening ceremonies stones for projects and opening such projects
will be initially booked here. Ultimately,
when the cost of project is assetised and
capitalized, such expenditure will be added
with the project cost by a F.A.J.V. and the
total cost of the project finalized
2065 Election expenses The cost of conducting elections of the
Councillors, Chairpersons, Mayor etc and
expenditure incurred for by – elections for
Municipal councilors
2066
2067
2068
2069
2070 Heavy vehicles - The cost of maintaining heavy vehicles used
Maintenance by the department including fuel, M.V.T.
insurance cost on retreading tyres etc
Similarly when repairs and servicing are
carried out in excess of 10% of the original
cost of a vehicle at one time, shall be
capitalized as it enhances the working
condition of the vehicles as well as its life
2071 Repairs & Self-explanatory
Maintenance –
Roads & Pavements
concrete
2072 Repairs & - do -
 Maintenance –
Roads & Pavements
– Black topping and
asphalt
2073 Repairs & - do -
Maintenance –
Buildings
2074 Repairs & - do -
Maintenance –
subways &
causeways
2075 Repairs & Self explanatory
Maintenance –
Bridges & flyovers
2076 Repairs & - do -
Maintenance –
Maintenance storm
water drains, open
drains and culverts
2077 Repairs & - do -
Maintenance –
Instruments,Plant &
Machinery
2078 Restoration of road This account is operated for road cuts
cuts restoration. The expense on restoration of
road cuts made for giving new water supply /
drainage connections to the house owners will
be booked here
2079 Maintenance of At times, specific grants are received from the
nutritious meal govt, for carrying out repairs to the nutritious
centres meal centers and replacement of utensils and
vessels due to wear and tear. The expenditure
incurred therefor are to be booked here
2080 Maintenance for It is the policy of the Govt. to undertake
improvements to periodical improvements to the slum areas for
slum areas which specific grants are given on 50:50 basis
or on full grant basis. If the scheme envisages
carrying out the maintenance work only, such
expenditure are to be booked here
2081 Maintenance Maintenance charges for railway level
charges for railway crossings / over bridges as claimed by the
crossings / over railways, every year are booked here
bridges
2082
2083
2084 Maintenance of All expenditure connected with the
 gardens / parks maintenance of gardens / parks
2085 Plants, Manure, The cost on purchase of plants implements,
implements etc manure, fertilizers etc for Parks & Gardens
and for Sewage farms
2086 Power charges for Power charges payable for electricity
Sewerage system / consumption in the pumping station and other
pumping stations sewerage systems
2087 Power charges for Power charges payable for the electricity
WS water head water consumption in the pumping stations, booster
works / pumping stations, water supply headworks
stations / booster
stations
2088 Power charges for The periodical payment of electrical
street lights consumption charges to the TNEB. The
TNEB is raising Power Consumption bills for
the street lights in the municipalities on
bimonthly basis. It is therefore, imperative
that a close watch is to be made to settle the
power consumption bills and to avoid creating
liabilities
2089 Maintenance The cost of purchase in piecemeal of
expenses for street tubelights, bulbs and other accessories
lights required for replacement in normal course of
maintenance. Conversion charges from tube
lights, Sodium vapour lights etc, are all toe be
booked here
2090 Wages Normally persons may be engaged on
nominal muster roll (NMR) as technical
assistants on daily wages under the work
charged establishment of the respective work
estimates and this will be covered within the
petty supervision charges of sanctioned
estimates.
2091 Stores – written off This account contains the value of stores
items which are written off of stock as
unserviceable. The debit to this account will
be made through an E.J.V.
2092 Petrol / Diesel In municipalities, having a separate diesel /
evaporation petrol bunk of their own, the cost of petrol /
diesel within the permissible limit of
evaporation covered by regularization orders
should be booked here through an E.J.V.
2093
2094
2095 Survey charges One or two sub-inspectors of the survey and
land records dept, with the supporting staff
 (field assistants) are stationed in the
municipal office and their services are utilized
for survey and land record purposes within
the municipal limit and also within the town
survey limits.
The amount payable on this account should be
ascertained and debited to this account, and a
liability provided therefor under code no.
4040
2096 Removal of debris The cost of removing debris by special
arrangement whenever they are found heaped
blocking the normal passage as this does not
form part of garbage
2097
2098
2099
2100 Sanitary / All expenditure on maintaining bulls (except
Conservancy those booked in code no. 2119) like
expenses insurance, shoeing, coir, medicines for bulls,
destruction of stray dogs / pigs, public toilet
maintenance, cost of dust bins etc are booked
2101 Expenses on Purchase of materials, required for sanitary
sanitary materials work, disinfectants, soaps, oil, chapels,
sweeping materials, fuel and chemical for
fogging machine etc
2102 Pauper charges The payment made for disposing of
unclaimed dead bodies based on supporting
evidence
2103 Fairs and festivals The expenditure incurred specifically on
notified fairs and festivals. This will enable to
claim contribution due as prescribed from
temple authorities vide code no. 1035
2104
2105 Improvements to At times, specific grants are received from the
compost yard Govt. for making improvements to the
compost yard.
2106 Anti-filaria / Anti All expenditure on the scheme
malaria operations
2107 Cost of medicines Cost of all items of medicines purchased or
supplied through stores to the dispensaries
and hospitals
2108 Rent for buildings The amount payable to the buildings taken on
rent for running hospitals, dispensaries,
maternity center schools etc
2109 Hospital expenses Washing charges, gas, cleaning charges, cost
other than of linen, telephone and other expenses
 medicines
2110 Diet to patients Bread, milk, egg etc to the patients n the
maternity centers and hospitals
2111
2112
2113
2114
2115
2116
2117
2118
2119 Fodder (Animal The amount on hay, cotton seeds, oil cake and
feed) other animal feed
2120 Zoological garden The cost of maintaining the zoo, if any,
maintenance including the personnel cost of persons
employed for the upkeep of the zoo
2121 Running of libraries All expenditure and incidentals in running
/ reading rooms libraries / reading rooms
2122 Maintenance of Self explanatory
lodging houses, rest
houses, TB, IB
2123 Maintenance of Self explanatory
kalyana
mandapams,
community hall,
townhall, kalai
arangam
2124 Cinema Theatare All expenditure on running cinema theatres
maintenance including the maintenance charges
2125 Maintenance Fees for headworks inspection by the chief
expenses – water electrical inspector to the Govt. etc
supply / sewerage maintenance of pipe lines repairing of burst
works etc., supply of alum, bleaching powder,
clorination charges
2126 Maintenance Maintenance of elementary school buildings
expenses – owned by the municipality repairs to
elementary schools buildings, furnitures, leveling play ground etc
2127
2128 Royalty The royalty paid to the PWD for drawing
water from river sources / resorvoirs
2129 Maintenance In most of the municipalities, the TWAD
charges to TWAD board, after completion of the water supply
Board / Metro schemes, continues maintaining the work of
Water Board / supplying water, from the water resources, till
Water Cess to the it reaches the OHT by its own manpower
Tamilnadu Pollution stationed at pumping stations, wayside mains,
 control board booster stations etc. The same procedure is
applicable in the case of payment of Water
Cess to Tamilnadu Pollution Control board
(TNPCB)
2130 Hire charges for In case of necessity, where water is to be
supply of water supplied by hiring of private lorries to the
through private residents in the areas in which neither public
lorries / tankers fountains are provided nor house service
connections are given, such expenditure is to
be booked here
 ASSETS and LIABILITIES

3000. ASSETS

The assets exhibited under the various fund accounts will show the nature of assets of the
Municipality as indicated below:

A. Revenue Fund:

The current assets will be broadly exhibited as under and as detailed with cod nos. 3001
to 3100
1. Stock
2. Property tax recoverable
3. Other tax and fees recoverable
4. Lease amounts recoverable
5. Employees’ Advances recoverable
6. Other advances recoverable
7. Cash balance
8. Bank balance
9. Fixed deposit under revenue fund and
10. Suspense accounts, if any

B. Capital Fund:

The fixed assets will mainly come under this fund and they are as detailed in cod nos.
3101 to 3130.

C. Water Supply and Drainage Fund

The assets relating to this fund are classified within the above code nos. whichever
applicable

D. Elementary Education Fund:

The assets relating to this fund are classified within the above code nos. whichever
applicable.

While using the above code nos. the prefix applicable to the respective fund should be
added.
A. Revenue Fund RF
B. Capital Fund CF
C. Water supply &
Drainage fund WS for Water supply
SF for sewage farm
D. Elementary
Education Fund EE
The above codification will facilitate the preparation of balance sheet for the
Municipality as a whole as well as fund wise balance sheets

Account code Detailed Description

no. Account Head
3001 Specific stock This account will account for the quantities and the
Account value of various types of inventory on hand at the end
of the financial year. Various materials to be used on
the works and for the departments under the control
of municipal engineer, Health officer / Sanitary office
/ Medical officer and all other subordinate officers
who are incharge of
(i) Stock account - Engineering
(ii) Stock account – public health
(iii) Stock account – medical
(iv) Stock account – electrical and others
(v) Stock account – petrol / diesel
(vi) Stock account – asphalt
(vii) Stock account – cement
(viii) Stock account – steel
(ix) Stock account – other engineering materials and
(x) Stock account – Water supply and drainage
materials will be brought under this account head
The balances under various categories of inventory
items (non consumables) will be arrived at as on 31st
March and exhibited under this head
3002 Property tax – This account represents the consolidated total tax due
recoverable to the municipality at the end of the financial year,
current for the latest year for which demand notices had been
served. This should agree with the DCB statement
finalized at the end of the year
3003 Property tax – This account represents the consolidated total of tax
recoverable due to the municipality towards property tax for five
arrears years immediately preceding the current year. This
should agree with the arrears shown in the DCB
statement
3004 Property tax This account is provided mainly to accommodate rare
collection cases of collections for which the details required for
suspense straight away crediting the amount to the respective
account years are not available. On ascertaining the details,
the amount in this account should be cleared by
means of a GJV.
3005 Profession The profession tax is payable by the tax payers on
Tax half yearly basis. So when the demand is finalized at
recoverable – the end of each half year, this account will be debited
 Current with the amount of demand so finalized by
preparation of a GJV. The balance (demand raised in
the year but not collected) will represent as
Profession tax recoverable
3006 Professional The description against code no. 3003 will apply with
tax suitable modification thereof
recoverable -
arrears
3007 Other taxes – This account represents the total amount of balances
recoverable - that are left uncollected under other taxes and for
current which DCB statements are prepared at the end of the
year, duly agreeing with the balances in the statement
3008 Other taxes The description against code no. 3003 will apply
recoverable - suitably
arrears
3009 Licence fees The description against cod no. 3007 is suitably
and other fees applicable here
–recoverable -
current
3010 Licence fees Same as in the case of code no. 3003
and other fees
–recoverable -
arrears
3011 Lease Demand will be raised at the beginning of the
amounts – financial year based on settlement of leases and
recoverable – bought to account.
current
3012 Lease The description against code no. 3003 will apply
amounts – suitably
recoverable -
arrears
3014 Water charges This account represents the demand raised for total
recoverable – water charges, due, and left uncollected at the end of
current the year
3015 Water charges This will represent the water charges due for previous
recoverable - year left uncollected at the end of the financial year
arrears agreeing with the figures in the DCB statement
3016 Education tax Same as in the case of code no. 3013
receivable -
current
3017 Rent on The rent due from the occupants of municipal
buildings quarters, municipal housing colonies and quarters for
recoverable sanitary workers. There are cases, where the retired
current employees of their family members continue to
occupy the quarters
3018 Rent on The rent due from the occupants of municipal
 buildings quarters municipal housing colonies and quarters, for
recoverable - sanitary workers, pending collection as per the arrear
arrears demand register has to be exhibited in this code
3019 Water supply Same as in the case of code no. 3003
and drainage
tax receivable
arrears
3020 Education tax Same as in the case of code no. 3003
receivable
arrears
3021 Accounts This account represents the amount to be collected
receivable – from parties to whom the municipality sold any of the
sale of assets
properties
3022 Survey fees Vide code no. 1029 for description
receivable
3023 Specific grant This account represents the estimated amount of a
receivable specific item of revenue grant that has been
committed by the state government like M and CW
grant etc, but received in the financial year in which
it is normally to be received
3024 Cost on sale This account represents the amounts recoverable
of land / from parties, employees etc to whom the
buildings municipality has sold its land and buildings on hire
recoverable purchase or outright purchase
3025 Interest There may be some fixed deposits made out of
accrued on municipal funds. In such cases, interest on fixed
fixed deposit / deposits, due for the year but not received till the end
dividend due of the financial year, is taken into account.
on shares
3027 Road cut The description against code no. 3026 is applicable
restoration – here
others
recoverable
3029 Handloom The accounting procedure detailed in code no. 3028
advance shall be followed
3030 Khadi The accounting procedure detailed in code no. 3028
advance shall be followed
3031 Education This is an interest free advance. The accounting
advance procedure detailed in code no. 3028 shall apply
3032 Flood - do -
advance
3033 Immediate An advance of Rs. 5000/- or the amount prescribed
relief advance by the Govt. from time to time, shall be paid to the
family of the employee who dies while in service
3034 Advance for This is an interest free advance, to be recovered in the
 solar cookers prescribed instalments.
3035 Tansi advance This is also an interest free advance recovered in the
prescribed instalments
3036 Advance of When an employee dies in service, the family is
T.A. to the likely to settle in their home town on the place of
family of the their choice other than the head quarters, for which
deceased they should be paid advance.
employee
3037 Tour advance The advance paid to the officers and employees for
undertaking official tours outside jurisdiction should
be booked here. The advance if any paid to the
Mayor / chairperson / deputy mayor / vice
chairperson and other councilors for their official
tours should also be booked here
3038 Advance of Generally, the employees, when transferred from one
pay and T.A. station to another, are paid advances of pay and T.A.
on Transfer in the stations from which they are relieved. The
above two items have to be settled only by cheques.
The journal entries to be passed are as follows:

(1) 3038. Advance of pay /

TTA A/c Dr
To Bank A/c Cr.
(For payment to the staff concerned on the eve of his
transfer)

(20 Bank A/c Dr

3038 To advances of pay /
TTA A/c Cr
(When the cheque is received from the new station
and brought to account by preparing BRV)
3039 Warm This is an interest bearing advance. The accounting
clothing procedure is the same as for the marriage advance.
advance
3040 Calculator This is also an interest bearing advance
advance
3041 Computer This is also an interest bearing advance
advance
3042 Bicycle This is an interest bearing advance. The accounting
advance procedure applicable to other advances shall apply to
this advance also
3043 Motorcycle -do-
advance
3044 Car advance -do-
3045 Marriage This is an interest bearing advance. The accounting
advance procedure indicated in code no. 3028 shall normally
 be followed
3046 House The accounting procedure indicated in code no. 3028
building shall be followed
advance
3047 Interest on Interest has to be calculated at the prescribed rates
staff advances and recovered from the employees in respect of all
– recoverable interest – bearing advances paid to them, after the
account advance (principle) is fully recovered. If the interest
so calculated will be of a substantial amount and it
cannot be recovered in one instalment, it should be
recovered in easy instalments as in the case of
original advance ie the amount of instalment fixed
should not exceed the instalment amount fixed for the
advance

This is an important function that should be attended

to, by the accounts cell at the time of recovering the
last instalment of any interest bearing advance from
an employee
The above procedure is not applicable to the HBA in
which case the interest due will have to eb worked
out only on recovery of the entire advance and the
number of monthly instalments fixed by issue of
proceedings separately
3048 Wages to The payment of wages to technical assistants
technical employed on NMR under work charged
assistants – establishment and met out of petty supervision
petty charges provision in the sanctioned estimates of the
supervision respective projects will be initially booked in this
charges code subject to clearance by inclusion in the value of
the particular asset created by execution of a project,
at the time of assetisaton / capitalisation
3049 Collection of Taxes left uncollected after they have barred by
arrears of limitation of time have to be brought to this account
taxes doubtful for final settlement either by collection / recovery or
write off
3050 Collection of Same position as in the case of code no. 3049
arrears of non
taxes (Fees) -
doubtful
3051 Advance to This account relates to the amount advanced to the
the suppliers suppliers for supplying materials, as per the
conditions agreed to, between the municipality and
the suppliers, after observing formalities in this
regard
3052 Advance to This account relates to the amount advanced to the
 the contractors for ‘operation and maintenance work’ to
contractors be done by them as per the agreement. These
advances are to be adjusted s and when the
contractors’ bills are received for payment.
The accounting system is explained under the chapter
on ‘Contractors Accounting’
3053 Materials cost This account relates to the materials issued to the
recoverable contractors, from the ‘stores’ for execution of capital
A/c works and also for operation and maintenance work
contractors to be done by them.
So the accounting entries are to be made on three
occasions, first at the time of issue of materials,
second at the time of return of materials by the
contractors and third at the time of paying the
contractors’ bills for the materials used by them for
the works.
1. When the materials are issued
3053 materials cost recoverable A/c
Contractors Dr
3001 to specific stock A/c Cr
1045 to other income Cr
2. When the materials are returned by the
contractors
3001. specific stock A/c Dr
2020. other expenses Dr
3053. To materials cost
Recoverable A/c
- Contractors Cr
3. When the cost of materials used by the
contractors, is recovered from their bills

3121/ 3122 projects in

progress Account Dr
3053 To materials cost
Recoverable A/c
- Contractors Cr
The difference between the issue price and the cost
price is credited to the other income head of account
when the materials are issued and debited to other
expenses account, when the materials issued are
returned to the stores
3054 Advance This account relates to the amount paid as advance to
recoverable - the staff members or outsiders for purchasing certain
expenses items urgently or for providing some services.

The accounting system is explained under the chapter

 on ‘Expenses Accounting’
3055 Other Advances sanctioned for other purposes and that
advances could not be accommodated under any of the
recoverable accounts head for advances under code no. 3051,
3052 and 3054 are booked to this account and
recoveries / adjustments watched. This account is
credited as and when the advances are recovered or
adjusted under proper authority.
3056 Deposits This account relates to the amount deposited with
recoverable various outside Institutions such as Telephone dept,
electricity board etc. These deposits are treated as
assets and shown under this head until they re
recovered or adjusted

Generally, these deposits are continued to be treated

as assets for years together, in as much as they are to
be retained by the Institutions that are rendering
services to the municipality. Therefore the recovery
or adjustment is quire remote
(i) The journal entries, at the time of paying such
deposit will be as follows:
3056 Deposits
Recoverable A/c Dr
To Bank A/c Cr
(Through a BPV)

(ii) When the deposit is recovered, through a BPV;

Bank A/c Dr
3056 To deposits
Recoverable A/c Cr
(iii) When the deposit is adjusted against the service
bill, if any, through EJV
Specific head of A/c Dr
3056 To deposit
Recoverable A/c Cr
3058 General This account represents the sum total of all imprest
Imprest amounts sanctioned and paid to various subordinate
Account officers of the municipality, both in the main office
and at outside locations like dispensaries, zonal
offices etc. The sum total of all such amounts should
tally with the amount exhibited in this head of
account
3059 Cash account This account represents the cash balance in the
Treasury at any point of time, more specifically
required for the purpose of trial balance and balance
sheet
 This account is credited through BRV when the same
is deposited into the Bank next day by remittance
chalan
3061 Collection The accounting system prescribed against code no.
account ……. 3060 should be followed
Bank
3062 Collection The accounting system prescribed against code no.
account ……. 3060 should be followed
Bank
3063 Collection The accounting system prescribed against code no.
account ……. 3060 should be followed
Bank
3064 Devolution The amount received from the CMA periodically
fund Account with reference to G.O.Ms no.109 MAWS dept dt.
…… bank 3.5.97 should be accounted here
3065 Personal This account is debited with all credits offered by the
deposit treasury officer for duty on Transfer of Property,
account _ Entertainment tax, magisterial fines, Govt loans and
TREASURY Govt grants etc i.e. inflows from the Govt
The same code no. shall be used with the pre-fix for
PD account – Elementary education till it is closed
3066 Payment All routine payments from revenue fund like salary
account …. bills, expenses, suppliers’ bills, contractors’ bills etc
bank are made through this account. This account is
debited, when the inter fund transfer is made from the
collection account …… bank (code no. 3060 – 3063)
This account is to be operated on alternate days or
weeks, according to convenience, if more than one
payment account ….. bank is operated
3067 Payment This account is also to be operated on alternate days
account or weeks i.e. on days or weeks when the account no.
….bank 3066 is not operated
3068 Old bank This account represents the revenue fund transactions
account of old bank account, prior to switching over to this
…….. bank accounting system. This account will be closed, once
all the transactions pertaining to it are ascertained and
the balance is fully reconciled and adjusted
3069 Elementary The transactions relating to elementary education
education have to be accommodated in this bank account
fund ….. bank
3070 Fixed Deposit
3071 Pension and Please see description against code no. 1065 to
Leave salary account for the amount due to be received
contributions
receivable
3072 Miscellaneous When orders are issued for recovery for the shortages
 recoveries etc, in the stores or in other items in monthly
receivable instalments through pay bills, the total amount so
ordered should be brought to this account by
crediting to the account no. 1066. The monthly
recoveries will be credited to this account
3073 Accumulated Based on the depreciation worked out at the
depreciation prescribed rates for fixed assets at the end of the
fund – financial year (Depreciation work sheet) and charged
investment to the income and expenditure account, the amount
so worked out, is taken to the credit of accumulated
depreciation fund account of individual assets. Such
amounts invested periodically are shown in this
account
3074 TDS on The TNEB every year based on high tension power
interest on consumed during the previous 12 months collects
CCD by Tneb deposit at 1.5 times of the average monthly
- receivables consumption and pay interest @ 5% annually. Gulf
on this interest.

The TNEB deducts interest Tax (preferably) at source

3075 to 3089
3090 SJSRY/NRY These are the funds received from GOI and do not
Bank form part of municipal funds. The role of
Accounts municipality is that of the custodian and executor of
various specific schemes decided / approved by the
Govt.
3091 to 3099
3100 Interfund In the administrative expediency, it becomes
Transfer necessary to transfer amount from one fund account
to another in order to meet out certain inevitable
payments as a tactful and prudent financial
management. Such transfer will be shown against this
code in the trial balance, by making postings in the
general ledger
3101 Land-Gross All expenditure incurred by the municipality towards
block (i) acquisition of land and
(ii) improvement to such lands
are to be accounted under this account. Cost of lands
is always to be accounted under this head and should
not be shown under any other Asset account
3102 Buildings – (i) All the expenditure incurred on purchase and
Gross Block construction of buildings are to be accounted under
this head
(ii) Expenditure incurred towards any addition to the
existing buildings, any modifications which result in
change of the class of the buildings and any major
 repairs (exceeding 10% of the original cost of the
building) at any one time are also to be accounted
under this head
3103 Subways and This account head includes the cost of causeways,
Cause ways vehicle subways, pedestrian subways and pedestrian
GROSS overbridges.
BLOCK
3104 Bridges and The expenditure incurred on the construction of
flyovers – bridges and flyovers are to be accounted under this
GROSS head. In addition, all major repairs exceeding 10% of
BLOCK the original cost of any bridge or flyover at any one
time are also to be booked under this account head
3105 Storm water All expenditure incurred in the construction of new
drains, open storm water drains, open drains and culverts are to be
drains and accounted under this head. In addition, all major
culverts – repairs exceeding 10% of the original cost of an
GROSS individual storm water drain or culvert at any one
BLOCK time are also to be booked under this account head
3106 Heavy This asset account contains the cost of all types of all
vehicles – heavy vehicles such as lorries, tractors, bulldozers,
GROSS mechanical sweepers, tippers
BLOCK
3108 Other vehicles This account is meant for accounting the cost of all
– GROSS vehicles other than those covered under account
BLOCK heads 3106 & 3107
3109 Furniture This account head includes the cost of various types
Fixtures and of furniture and office equipments like steel chairs,
Office steel tables, wooden chairs, wooden tables, steel
equipments - racks, wooden racks, water coolers, refrigerators,
GROSS radios, televisions and other office equipments such
BLOCK as bradma machines, registrix etc used in all
departments in the office etc
3110 Electrical The electricity board does not provide any kind of
instllations – lamps. The board will provide electrical posts in the
Lamps / Tube newly formed colonies etc, on payment of estimated
light fittings – amount as claimed by it and replaces the existing
GROSS posts within the municipal areas at its cost for
BLOCK providing street lights.
3111 Electrical The cost of all electrical fittings which include fans
installations – etc installed in any of the municipal office premises
Others – including those in various unit offices, dispensaries,
GROSS hospitals should be accommodated here.
STOCK
3112 Plant and The cost of all Plants and Machineries such as road
Machineries – rollers, tar boilers, trailors, mixers etc.
GROSS
 BLOCK
Roads & Pavements:
General:

The roads / streets / lanes of the municipality that are declared as ‘Public’ are classified
under three categories:
Concrete
Black – topped
Others (metalled & earthen)
Separae account heads are to be operated for each of these three categories. The word
‘Roads’ shall mean ‘Streets’ and ‘Lanes’ also.
The following types of expenditure are to be booked under these accounts

1. Cost of forming new roads

2. Cost of widening existing roads
3. Cost of relaying existing roads
4. Cost of upgrading roads from one category to another (to be booked under
category to which a road is upgraded)
5. Cost incurred in laying pavements
Similarly depreciation for these assets is to be accumulated under separate account heads.

3113 Roads & pavements This asset head includes the cost of all roads and
– Concrete – pavements made of concrete mixture. The cost of all new
GROSS BLOCK additions to this category, like widening and ralaying of
any existing road, the cost of upgrading from inferior type
of road to concrete road and the cost of conversion will be
debited to this account head.
3114 Roads & pavements This account head consists of the cost of all roads and
–Black topped – pavements laid with asphalt. The cost of laying additional
GROSS BLOCK roads, widening, relaying existing roads and upgrading
and conversion of existing roads to the level of this
category, will be included in this category
3115 Roads & pavements This account includes the cost of all other types of roads &
– Others – GROSS pavements. The cost of laying new roads will be debited to
BLOCK this account
3116 Instruments & The cost of instruments and equipments for hospitals,
equipments in dispensaries, M&NCW centers and other health posts
hospitals and should be booked here
dispensaries etc
3117 Tools & Plant The cost of new tools purchased in sets for maintenance of
Gross Block hand pumps etc should be booked here
3118 Public Fountains – The cost of providing public fountains will be debited to
Gross block this account
3119 PIP – Indirect cost To account interest paid during the infrastructure, advt
– non grant charges, inaugural functions etc
3120 PIP – Indirect cost - do -
 – Govt grant

3121 Projects in All expenditure relating to capital projects executed by the

progress account municipality during a financial year should be accumulated
under this head. On completion of the project, the
expenditure accumulated under this account will be
transferred to the respective fixed assets account head
mentioned earlier
3122 Projects in This account is provided to accommodate and identify the
progress A/c Govt project executed out of the Govt grants. The description
Grants against code no. 3121 shall also apply here
3123 Capital fund A bank will be nominated for accommodating all inflows
…..bank and outflows of the capital fund. I.e. both receipts and
payments can be accommodated in one account, in view of
the fact that receipt items will be very few. This account
reflects the balance in the bank
3124 Capital fund If the council decides to have one more bank account in
…..bank some other bank, for capital fund, a bank account may be
opened accordingly. This account reflects the balance in
the bank
3125 Advance to PWD The entire amount of loan / grant for a period received is
/ highways / TN placed at the disposal of the executing agency and progress
Construction of work watched
Corpn ltd
3126 M.P. Fund Amount received out of MPs allotment fund from the
District collector for executing specific capital work
3127 M.L.A. Fund Amount received out of MLAs allotment fund form the
district collector for executing specific capital work
3128 Deferred revenue Heavy expenditure which is primarily of a revenue nature
expenditure such as preliminary expenses in floating a new project or
underwriting commission, brokerage, discount on issue of
debentures or venturing on market loan, advertisement
charges to popularize a new project etc, the benefit derived
from which is likely to extend beyond the year in which it
is incurred, it is a general accepted accounting policy to
allow such an expenditure to be temporarily capitalized,
treating it as a current asset to be spread equally over 3 to 5
years for which the benefit is to be enjoyed.
3129 Basic amenities Self explanatory
scheme
3130 National slum Self explanatory
developmental
programme
3131 Advance to The amount required for execution of a project by this
TWAD board / agency will be paid in advance based on obtaining
Metro water periodical statement of expenditure
 board
3132 Water supply –
Head works,
OHT etc and
water supply
mains
3133 Drainage and
Sewerage pipes,
conduits,
channels etc
3134 Ground water
wells / deep bore
wells
3135 Hand pumps –
India Mark II
3136 Reservoirs
3137 Sullage water
removal tankers
3138 Other items
3139 Water supply & A bank will be nominated for accommodating of all
Drainage fund …. income and expenditure including capital nature. In other
Bank words, both receipts and payments can be accommodated
in one account as the transactions are not heavy as
compared to that of revenue fund
3140 Water supply & The initial amount for providing new Water Supply and
Drainage fund …. Drainage connections collected form house owners should
Bank be deposited in this accounted and utilized for repayment
of loans or for execution or capital works.
3141 Drainage fees The amount collected and accounted in code no. 3149 will
from building flat be deposited in this bank code
promoters ….
Bank
3142 Under ground The amount collected and accounted in code no. 3149 will
drainage scheme be deposited in this bank code
initial deposits
……..bank
3143 to
3149
3149 Drainage feesFees for drainage facility covered in the construction of the
from building flat flats will be credited in this code. The amount so collected
promoters shall be kept in a bank account assigned with codeno. 3141
3150 Under ground The initial deposits collected form the house owners for
drainage scheme providing underground drainage scheme facility to them
initial deposit are accounted here by keeping a separate bank account
with code no. 3142
3151 10th finance The operation of this fund can be accommodated in the
 Commission bank account for Devolution fund (Bank code no. 3064)
Fund
3152 Decentralised The operation of the fund received under this scheme can
District Plan be accommodated in the capital fund bank account code
no. 2123
 4000. LIABILITIES

The liabilities as enumerated under various Fund Accounts will show the nature of the
liabilities of the municipality as indicated below:

The current liabilities relating to the payment due to the suppliers, the contractors, the
dealers etc, other outstandings and the recoveries made from the pay bills of the
employees and those from other bills are broadly classified under the revenue fund /
capital fund. The contributions loans and grants from the Govt, the payments due to the
contractors for execution of projects and the accumulated depreciation accounts of all
fixed assets are mainly classified under the capital fund.

Similarly the liabilities relating the to the Water supply and Drainage fund and the
elementary education fund accounts are also accommodated within the code no. provided
for the revenue and capital funds, so far as they are similar items of liabilities in nature.
Wherever certain items are particular to those funds, they are given specifically separate
code nos.

The code nos. now provided form 4001 to 4087 have to be used with prefix

‘RF’ for Revenue fund

‘CF’ for Capital fund
‘WS’ for Water supply & Drainage
‘SF’ for Sewage farm and
‘EE’ for Elementary Education fund

The above codifications will enable the preparation of the balance sheet of the
municipality as a whole as well as the fundwise balance sheets.

Account code Detailed account Description

no. head
4001 Accumulated This account will reveal the accumulated surplus
surplus / deficit over the years. The NET surplus or deficit for
each year is obtained, once the Income and
Expenditure account is drawn up, from where it is
to be transferred to this account at the end of the
financial year
4002 Income and This account is drawn up each year to reveal the
Expenditure net surplus or deficit form revenue transactions.
account All expense accounts are closed and exhibited in
this account
4003 Ways and means This advance indicates the short-term borrowing
advance by the municipalities, meant primarily to tide
over the financial difficulties in meeting its day to
day administrative expenses. This advance is
 given by the Govt, repayable in lumpsum or in
limited annual instalments.
4004 Loans from the This account indicates various loans for specific
Govt capital schemes received form the govt and also
the loan that was converted from ways and means
advance specified in code no. 4003
4005 Loan from This account relates to loans received from
HUDCO HUDCO. The procedure indicated in code no.
4004 shall be followed here
4006 Loan from This account relates to loans received from
TUFIDCO TUFIDCO. The above procedure shall be
followed here alo
4007 Loan from The procedure of accounting is the same as in
TNUDF code no. 4004
4008 Laon from …. Any loan from the bank as authorized by the
bank Govt, for projects is to be accounted here
4009 Overdraft from At times, the municipality is likely to be
….bankl permitted by the State Government to have an
overdraft account with in the bank in which it is
having an account. This account indicates the
amount up to which overdraft facility could be
availed
4010 Diversion from When a municipality decides to undertake
other municipal execution of a major scheme, by diversion of
fund surplus amount available in any other municipal
fund
4011 Contribution from The amount spent or given form any of the
municipal fund municipal fund as matching contribution at the
percentage for execution of schemes approved by
the Govt or for the execution of the Capital works
of its own shall be treated as ‘Contribution’
4013 Contributions This account represents the Capital Grant out of
from the Govt which the capital work (project) is completed and
the work assetised.
4016 Tender deposit The tender deposits received form the contractors,
contractors security deposit paid by them and the ‘retention
money’ held, out of value of work done by the
contractor as per agreement condition are
accounted for, here. The repayment also is passed
through this account
4019 Security Deposit The receipt and repayment of security deposit
– Staff form / to certain employees of the municipality,
to whom security deposit is prescribed, are to be
accounted under this head
4020 Deposits – Others The election deposits and the deposits received
for purposes other than those for which specific
 code no. are provided are to be accounted here –
Election deposit
4022 Co-operative The recoveries made in the salaries’ bills of the
Society Loan employees concerned for their dues to the co-
recoveries operative society, if any, as per the statement
received from it are to be credited and be cleared
4023 RD recoveries The recoveries towards Post office recurring
deposit and their remittance to the post office will
be accommodated here
4026 F.B.F. / Group The subscriptions recovered under Group
insurance scheme insurance scheme i.e. family benefit fund are to
recoveries be remitted to the Govt. Till such time they are
remitted, they are accounted here
4029 Income tax The income tax recovered form the salary bills of
deduction at the employees is to be credited to this account.
source from This account will be debited at the time of
employees - TDS remitting it to the I.T. department through the
chalan prescribed therefor
4033 Health fund The total amount of subscription at the prescribed
subscription rate recovered from the pay bills of the
employees, towards the health fund constituted by
the Govt. should be accounted here and remitted
to specified authority.
4035 Income Tax The income tax and surcharge deducted from the
deductions contractors’ / suppliers bills will be credited to
this account.
4037 Sales tax and The sales tax and surcharge on sales tax, collected
surcharge on on tender schedules, sale of products, scraps etc,
Sales tax – are to be taken to this account. When they are
payable remitted to the Govt this account will be debited
4048 Accounts payable The description given above will apply here also
- suppliers
4049 Accounts payable This account covers the amounts payable to the
- expenses outsiders for services rendered and for all the
other expenses. Credits are raised in this account
on the basis of the bills after scrutiny and debits
on the basis of payments made. Deposit refunds
should also be given this code number
4053 Contribution to The contribution to the CMDA / LPA to be paid
the CMDA / LPA at the rate prescribed by the Government based
payable on gross revenue receipts is to be worked out and
credited to this account and this account debited
when payment is actually made
4055 Road cut Deposits received form the Telephone dept for
restoration restoring Road cuts made by it are accounted
deposit – here. After the expenditure is incurred, the
 telephone balance, if any, has to be transferred to that
department department. Hence it is a liability shown here
4056 Road cut The above description shall apply here also
restoration
deposit - others
4058 Royalty payable Similar will be the position in the case of
payment to govt, for water drawn from river or
reservoir of the Govt. and payable as royalty
4060 Kahdi advance The above procedure shall be adopted for the
recovered – payment to the khadi board for the purchase of
Payable to khadi khadi cloth by the employees
board
4061 Buildings – This account represents the cumulative
accumulated depreciation worked out on all assets mentioned
depreciation in code no. 3102. vide para 11 of chapter ‘09
Projects and Fixed Assets Accounting’ in the
Accounting manual Vol I
4062 Subways and The above procedure is applicable to assets in
causeways – code no. 3103
accumulated
depreciation
4063 Bridges and - do -code no. 3104
flyovers –
accumulated
depreciation
4064 Storm water - do – code no. 3105
drains, open
drains and
culverts,
accumulated
depreciation
4065 Heavy vehicles - do - Code no. 3106
accumulated
depreciation
4066 Light vehicles - do - Code no. 3107
accumulated
depreciation
4067 Other vehicles - do - Code no. 3108
accumulated
depreciation
4068 Furniture, - do - Code no. 3109
Fixtures, Office
equipments -
accumulated
depreciation
4069 Electrical - do - Code no. 3110
 installations –
Lamps & Tube
lights fittings -
accumulated
depreciation
4070 Electrical - do - Code no. 3111
installations –
Others -
accumulated
depreciation
4071 Plant & - do - Code no. 3112
Machinery -
accumulated
depreciation
4072 Roads & - do - Code no. 3113
Pavements –
concrete -
accumulated
depreciation
4073 Roads & - do - Code no. 3114
pavements –
black topped -
accumulated
depreciation
4074 Roads & - do - Code no. 3115
pavements –
others -
accumulated
depreciation
4075 Maintenance If the claim is received in the financial year
charges fro(accounting year) form the railways , the same
railway levelmay be paid by debiting the code no. RF2081.
crossings / Over Otherwise on receiving the claim, due for
bridges - payable payment, a provision has to be made under this
code by a journal voucher, for subsequent
payment
4078 Instruments & The procedure explained in code no. 4061 shall
Equipments in be followed. Vide asset code no. 3116
hospitals and
dispensaries etc –
Accumulated
depreciation
4079 Tools & Plant - -do- code no. 3117
Accumulated
depreciation
4080 Public fountains - -do- code no. 3118
 Accumulated
depreciation
4081 Head works, -do- code no. 3132
OHT etc Water
supply Mains -
Accumulated
depreciation
4082 Drainage, -do- code no. 3133
Sewerage pipes,
conduits etc -
Accumulated
depreciation
4083 Ground water -do- code no. 3134
wells / deep bore
wells -
Accumulated
depreciation
4084 Hand pumps – -do- code no. 3135
India Marks (II) -
Accumulated
depreciation
4085 Reservoirs - -do- code no. 3136
Accumulated
depreciation
4086 Sullage water -do- code no. 3137
removal tankers -
Accumulated
depreciation
4087 Other items -do- code no. 3138
4088 Audit fees -do- code no. 2036
payable
4089 Pension & leave -do- code no. 2053
salary
contribution
payable
4090 SJSR/NRY Bank -do- code no. 3090
Grant
4100 Capital reference – whenever land or any other
assets given free of cost, the value there of shall
be taken as the value of the respective asset
account with corresponding entry as Capital
reserve on the Liability side forming part of the
Capital, as per valuation norm given in the
Accounting manual
4101 -do- 2044
RECOGNITION NORMS FOR MUNICIPAL ASSETS AND REVENUE
RECOGNITION NORM FOR MUNICIPAL ASSETS & REVENUES

REVISED NOTE (30-12-99)

LANDS:

All the lands assigned, gifted, allotted and purchased by the Urban Local Bodies (ULBs)
should be taken in the Asset Register and the same reflected in the Balance sheet. The
ULBs get the lands by the following methods

i) By direct purchase from the land owners

ii) By acquisition following the Land acquisition procedures on payment of
compensation fixed by the Govt.
iii) Open spaces in the lay-out gifted by the promoters as a precondition for the
approval of lay-out plan
iv) Lands gifted to UBLs by public, organizations etc, with specific condition
v) Gifted lands without any conditions
vi) Lands alienated by Government free of cost to ULBs for a specific usage.
vii) Vested lands (Revenue lands of Govt) like cattle stand, grazing ground, etc
viii) Lands alienated by Government free of cost to ULBs without any condition

The following norms may be adopted for the recognition of these lands.

Sl.No. ASSET CLASSIFICATION & RECOGNITION NORM

ACCOUNTING STANDARD (AS)
1 LANDS PURCHASED BY ULBS(S.No. i&ii)

AS 10 deals with Accounting for Fixed Assets These lands should be valued at
which includes land, building, plant & the cost of purchase including
machinery, vehicles, furniture & fittings, legal expenses, Filling cost,
Design, Pattern, goodwill and trade marks. AS Fencing, improvements, etc if
10 describes the fixed asset as an asset held any
with the purpose of producing or providing
goods or services and is not held for future sale.
This also describes the cost of the asset as its
purchase price including the import duties and
any directly attributable cost of bringing the
asset to its working condition for its intended
use

2 LANDS GIVEN FRE OF COST(S.no. v&vii)

These are the lands obtained by the ULBs These lands are without any
 without any consideration / gifted and also
without any conditions attached. The ULBs are
free to use in the manner it desires
As per the provisions in AS 12, these are
similar to non-monetary grants received
from Government and needs to be recorded
at nominal value
3 LANDS GIVEN FREE OF COST
(S.no.iv&vi)
AS 12 deals with Accounting for Government
grants. Accordingly to this standard, Non-
Monetary Governmental grants such as Land
and other resources given free of cost are to be
recorded to non-depreciable assets (which will
have no depreciation in the course of its life)
should be credited to Capital Reserve so that it
can form part of the contribution to the capital.
4 GIFTED OPEN SPACES IN THE LAY-
OUT (S.no. iii)
AS 10 recognizes an item as asset only when it
is held with the intention of being used for the
purpose of producing or providing goods or
services
5 GOVT LANDS VESTED WITH THE ULB
(S.no. v & vii)
AS 10 recognizes an item as asset only when it These are not owned by the
is held with the intention of being used for the ULBs but are only vested with
condition and the Municipality is
free to decide on the usage.
Hence the same can be valued at
the guideline rate and the
amount credited to Capital
Reserve as source of acquiring
these assets
These are the lands gifted to the
ULBs for a specific purpose and
cannot be used for any other
purpose. These lands are not
available to ULBs for sale. As
suggested in the AS 12 the
nominal value of these lands
calculated on a token value of
Re.1.00 and the same credited to
capital Reserve as source of
acquiring these assets
These are the lands gifted by the
Layout promoters & public to
maintain as open space as parts
& play fields. These lands, even
though the property of the ULB,
they cannot put it to any other
use. Hence a token value of Re.1
for each piece of such land
should be assigned crediting the
Same as capital Reserve.
However any developmental
work incurred in these lands to
bring them into use as parking
space, play-field, part etc. should
be capitalized as asset.
 purpose of producing or providing goods or ULBs. They are only trustees of
services these lands. Govt. only obtains a
NOC from the ULB before
alienating the same to any
parties or changing the usage
and hence should not be takenin
the Books of Accounts of the
ULBs.

CUT OFF DATE FOR VALUATION OF LANDS

As a general policy, to adopt uniform procedures across ULBs, it is proposed to calculate

the value (other than those where only token value is to be adopted) as per the guideline
register as on 1.4.99.

For Sl.No. ii above, the land acquired by means of land acquisition, the cost at which they
were acquired is to be adopted, since these lands can be used only for the purchase for
which they were acquired.

ENCROACHMENTS

Often the ULBs lands are encroached by public and practically it becomes impossible to
evict the encroachments due to socio-political considerations even though the ULBs are
saddled with many legal powers to remove the same. Hence it is necessary to decide on
the treatment of encroachments in the books of Accounts. The following provisioning
norms are suggested for the treatment of encroachments.

i) Encroachments between 1-2 years 50% provisioning

ii) More than 2 years & Govt. / Court stay against eviction 90% provisioning

Maximum of 90% provisioning is suggested to retain the asset in record without totally
eliminating through provisioning.

NON SALEABLE ASSETS

There are Non-saleable assets with UBLs like parks, playfields, water bodies, roads,
drainage, sewers etc. Mostly the land for these might have been obtained free of cost and
hence will not have any value and no necessity for valuation. However the ULB spends
money for developing these lands to bring it to the required usage.

AS 10 (Accounting Standard for Fixed Assets) of ICAI explains as ‘Fixed Asset is an

asset held with the intention of being used for the purpose of producing or providing
Goods or Services and is not held for sale in the normal course of Business’.
In this line the cost of the development work made for creating these amenities on the
land should be assetized and recorded under the respective category after depreciating for
the usage at the rate prescribed in the Accounts Manual for each category of Asset.

If the lands were purchased for these purpose it should be valued as indicated in Table 1
and para-3.

BUILDINGS

All the buildings of the local bodies at the actual construction cost during the year of
construction should be taken as cost. The incidental expenditure incurred such as
Planning permission, testing and quality control, charges paid to service agencies, design
supervision charges and interest during the construction should be added and the final
value arrived. As far as the rate of interest to be adopted, if the cost of construction was
met through Loan capital, the interest rate of loan can be taken as follows:

Interest cost = Construction cost x Rate of interest of x Half construction

Loan capital period

For the purpose of valuation, the land cost of the building should not be included with
building, but should be included under land with the gross value.

It is found that most of the ULBs do not have the original cost details of buildings
constructed in the past. To standardize the valuation procedure, it is suggested that
building constructed prior to 3/99 should adopt PWD schedule of rate as of March 99
multiplied with the area of building. The depreciation amount for the number of years of
life of the building should be calculated and deducted from the value so arrived for the
net value of the building as of 1.4.99. For subsequent constructions, only the actual cost
should be arrived as suggested above.

VEHICLES, FURNITURE, FITTINGS ELEC. INSTALLATION &

EQUIPMENTS:

These should be valued at their purchase cost along with the expenditure incurred in
making them operational such as Taxes, duties, Freight, Installation charges etc. if any
expenditure incurred to enhance the efficiency of these Assets of Maintenance cost at a
particular point of time then the same should be added to the gross value of these assets
as discussed under maintenance Vs improvement works. From the actual value of these
items due depreciation for the life of these assets should be deducted to arrive the net
value. In the case of street lights, only the fittings are the properties of the ULBs and the
same should be taken as assets for incurring the maintenance expenditure. The
replacement of bulb is a maintenance item and should be treated as expenditure and not
asset.

MAINTENANCE VS IMPROVEMENT WORKS:

There is a confusion prevailing over the treatment of subsequent expenditure incurred
over the fixed assets as whether to treat it as repair & Maintenance and charge the same
against Income & Expenditure or as capital expenditure and book it directly to the gorss
book value of the Fixed assets.

The Accounting Standard for fixed Assets in para 12 explains that when an expenditure
is incurred to increase the future benefits from the existing asset beyond its previously
assessed standard of performance it is considered as improvement expenditure and the
same is included in the Gross book value. When this cost of addition becomes an integral
part of the existing asset it is added to the gross book value. If this has a separate identify
and is capable of being used after the existing asset is disposed of, it is accounted for
separately.

As per Accounting Standard 6 (Depreciation Accounting), the quantum of

depreciation to be provided in an accounting period involves the exercise of judgement
by management in the light of technical, commercial, accounting and legal requirements
and accordingly may need periodical review. If it is considered the original estimate of
useful life of an asset requires any revision, the anamortised depreciable amount of the
asset is charged to the revenue over the revised remaining useful life.

a) Routine maintenance expenditure are charge over the income & Expenditure of
the respective year and hence should not be taken as asset. As explained in para 7
& 8 under CHAPTER 9 of the Revised Accounts Manual only expenditure over
Rs. 1000 should be capitalized as assets. Also the major maintenance
expenditures if it is over Rs. 10000 or 10% of the value of the asset, then the same
should be treated as capital works and added to the gross block of the respective
asset.
b) Improvement works such as road widening, upgradation from gravel to black top,
putting up road separator, storm water drain, concrete duct for utilities, Air
conditioning the vehicles etc should be taken as value at the actual cost.
c) Losses and damages during the life of the asset due to usage, natural calamities,
etc should be written off (the full outstanding value of that period) in that year of
occurrence and the value of new work only should be taken as value.

TREATMENT OF LOSSES:

If an asset is damaged during the course of its life due to accident and natural calamities
i.e. Road and street light washed off during flood, the same is a capital loss and should be
written off as a charge to the Income & Income Expenditure statement of that year.
Similarly for arriving the opening balance, such non-existing assets should be excluded
after following the established procedures.

REVENUE RECOGNITION

Accounting Standard 9 describes the revenue as the Gross inflow of cash, Receivables
or other consideration arising in the course of the ordinary activities of an Organisation
from the sale of goods, from the rendering of service and from the use by others of the
organization resources yielding interest, royalties and dividend. Revenue is measured
by the charges made to the customers for services rendered to them and by charges and
rewards arising from the use of resources by them.

Recognition is mainly concerned with the timing of recognition of revenue in the

statement of profit & loss of an enterprise. When uncertainties exist regarding the
determination of the amount, or its associated costs, these uncertainties may influence
the timing of revenue recognition. Demand for taxes & fees and other incomes should be
raised only when it is due as per law, contract etc.

As for as Property Tax is concerned there is no uncertainty in regard to the collection of

the same. The uncollected property tax will have first charge over the property as per
taxes. Also the ULBs are saddled with legal powers to recover the same through japti.
Therefore the demand raised for taxes and fees should be taken as revenue as and when
the same is demanded (i.e. on its due date) and recorded in the books of accounts through
a journal entry and shown as RECEIVABLES. The collection of these demand should be
credited to the Bank account by debiting the respective RECEIVABLES A/C.

The Act provides raising of property Tax demand on omitted properties for only upto 6
years backwards, beyond which the ULBs cant have legal claim. In this line, the
following provisioning is suggested to charge against the Income & Expenditure Account
of the current year by making equivalent amount as PROVISION FOR DOUBTFUL
REVENUES. Subsequently if any of these amount is collected, the same may be taken as
income by reducing the provision already made.

SL CATEGORY PROVISIONING
A. DOUBTFUL CATEGORY
1 Uncollected Taxes for more than 3 years 100% value
2 Revenue not collected 100% value
For more than 2 years
3 Arrears due to court stay 100% value
4 Escaped Licence Fees 100% value
B. SUBSTANDARD CATEGORY
1 Arrears referred to court but no stay 50% value
2 Uncollected Taxes for 1-2 years 50% value
3 Revenue not collected 50% value
For 1-2 years
C STANDARD CATEGORY
1 Uncollected Arrear below 1 year 0% value
2 Demand due from Govt / Govt organization 0% value

Full provision for the uncollected tax will amount the same as being done in the Cash
based Accounting System .Also as explained already the uncollected property tax will
have first charge over the property concerned. Further the ULB may be able to recover
the dues through the provisions in the Revenue Recovery Act. Hence no amount of
property tax when not decided otherwise in the court of law will become uncertain
warranting provision. However in case of Lease revenues, etc, which cannot be identified
with any Fixed Assets need stringent provisioning. The above suggestion is considering
he efficiency of ULB and can be modified reasonably.

The same should be adopted for other tax items.

STAMP DUTY DUE FROM GOVT.

The Government passes 90% of the Stamp duty collected at the time of registration of
properties. This amount is communicated by the registration department periodically to
the ULB. Since the actual amount due from the Govt on this account is communicated
quarterly, the same should be taken into account on receipt of the same on quarterly
basis.
 ACCOUNTING MANUAL FOR URBAN LOCAL BODIES IN TAMILNADU

FORMS & FORMATS

GOVERNMENT OF TAMIL NADU

MUNICIPAL ADMINISTRATION & WATER SUPPLY DEPARTMENT
MCF 1 Date
Bank Copy
………….Municipality / Corporation

Property Tax Remittance Chalan Chalan

No.

Section Division/Ward Assessment no.

No.

Assessee’s Name:
Address of the house:

Sl. Period Property Tax

No. Rs. Total
Rs.

Arr. Curr. Arr. Curr

(1) (2). (3) (4) (5) (6)

Total

Rupee in words

Remitter’s Signature
Signature Bank Seal
N.B. This receipt is valid subject to realization of cheque
MCF 1 Date
Municipal Copy
………….Municipality / Corporation

Property Tax Remittance Chalan Chalan

No.

Section Division/Ward Assessment no.

No.

Assessee’s Name:
Address of the house:

Sl. Period Property Tax

No. Rs. Total
Rs.

Arr. Curr. Arr. Curr

(1) (2). (3) (4) (5) (6)

Total

Rupee in words

Remitter’s Signature
Signature Bank Seal
N.B. This receipt is valid subject to realization of cheque
MCF 1 Date
Tax Payer’s Copy
………….Municipality / Corporation

Property Tax Remittance Chalan Chalan

No.

Section Division/Ward Assessment no.

No.

Assessee’s Name:
Address of the house:

Sl. Period Property Tax

No. Rs. Total
Rs.

Arr. Curr. Arr. Curr

(1) (2). (3) (4) (5) (6)

Total

Rupee in words

Remitter’s Signature
Signature Bank Seal
N.B. This receipt is valid subject to realization of cheque

Note:
1. If tax is to be paid for additional period, additional forms must be used
2. The tax payers are advised to keep the receipt in safe.
 . ……………………… Municipality / Corporation

Form No. MCF 3 BANK RECEIPT VOUCHER ZONE

FUND: RF/CF/WS & D / EEF Chalans from …….. BRV No.
To…… Date:
BANK

Account Account Head Dr. Cr. Narration

Code Rs.
(1) (2) (3) (4)

Prepared by Checked and approved Compilation Section

By Posted

Shroff / Jr. Assistant Manager At page …… of At page ….. of

______________ Receipts book General Ledger
Administrative Officer

Assistant

Enclosures:
1) Chitta Abstract
2) Triplicate chalan copies ………
3) Chalan register extracts of revenue assistants
4) Statement of receipts for departmental collections

Debit column is provided separately as it is necessary to account the collection with different bank accounts
within a FUND.
Form No. MCF 4 REVENUE FUND / CAPITAL FUND
W.S. & DRAINAGE FUND
Month & Year: ELEMENTARY EDUCATION FUND

……… Municipality / Corporation

Bank Code No.

Bank A/c No. RECEIPTS BOOK

Daily Initials
Date BRV Cash Cheque Date Collection Transfer Transfer Dishonour Balance of
No. of by Bank / out in of cheque Acct /
Credit Adjustment A.O
in the in Treasury
Bank

Rs. Rs. (in Rs. Rs. Rs. Rs. Rs.

red)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

Instructions:

1) The receipts book shall be maintained in the Accounts cell.

2) Column 5 is meant for noting in RED INK the dates of credit in the Bank for
receipts by cheques so as to prepare Bank Reconciliation Statement every month.
3) It is enough if the total amount of BRV is entered in columns 3 or 4 or 6 based on
collection by cash / cheque / bank.
4) All adjustments made in the Treasury for duty on transfer of property,
entertainment tax etc for remittance by Govt. departments towards property tax,
Water charges etc, shall be exhibited in col. 6 by preparing BRVs therefor.
Form No. MCF 5 …………………. Municipality / Corporation

Claimants’
Bill no. : BANK PAYMENT VOUCHER Deptal.
Date : Code

Prepared by Checked by Approved by Compilation Section

Posted by Page
Asst. Deptl Acct. Manager / Commissioner / Asst. No.
Officer with Ad. O. Commissioner ( ) In
Designation Payments
and Date: Asst. Book

Instructions: MCF 5 (contd…)

1. The BPV should be pre-numbered and prepared by the Accounts cell only as and
when payments ready for the bills sent by various depts. along with the journal
voucher.
2. Wherever entries are made in the subsidiary ledgers such as advance recoverable
register, deposit register demand register etc, reference to Folio No. in the
subsidiary ledger should be entered under the column ‘Sub-Ledger’ at the time of
the claim being processed and passed in the Accounts Cell for payment.
3. The credit column is not provided separately as it is implied that the bank account
will be credited.
 …………. Municipality / Corporation

Form No. MCF 6 PAYMENTS BOOK

Bank
Code nos.

Date BPV A/c Payee Partic Cheque Amt Amt Amt Amt Amt Date Daily Dated
No. Code ulars no Rs. Rs. Rs. Rs. Rs. of balance initials
encash of the
ment cheque
(in red signing
ink) Rs. officer
( )
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)

Instructions:

1. This must be maintained in the Accounts cell

2. Additional columns are provided for ‘amount’ to accommodate payment
accounts, devolution fund and Treasury account. This will facilitate easy
preparation of Bank reconciliation statement.
3. The column ‘Daily Balance’ will indicate the balance individual Bank Accounts
as and when the transaction takes place in those Accounts.

Instructions:

1. This must be in Book form with pre-printed serial number

2. The book must be in duplicate for use by the Corporation. The first copy shall be
sent to the zone from whose ‘Collection Account’ funds are transferred to the
main office (Revenue Fund)
3. Similarly this shall be used for transfer of funds from the Revenue Fund Account
of the main office, to the payment account of the zones.
4. This book shall also be used for transfer of funds from Bank code o. 3139 and
3140 relating to Water supply and Drainage Fund of zones to the main office.
 5. The entire collections in bank code no. 3069 relating to elementary education
fund of the zones shall be got transferred to the main office, by using this book.
6. While the bank transfer book is maintained in the main office, for all such
transfers and postings therefor made in the General ledger in code no. 3100, its
enough if such transfers from and to are posted in the General Ledger in code no.
3100 of the zones.
7. No BRV is necessary for above transfers.

INTER FUND TRANSFER SLIP

Form No. MCF 7 ….. Municipality / Corporation No.

Date:

Transfer From, Transfer to

………………… ………………
………………… ………………
………………… ………………

Bank A/c no. Bank A/c no.

Bank Code Dr. Bank Code Cr. Cheque no. Purpose and
No. (Amount) No. (Amount) & narration
Transferred Rs. Date
to Transfered Rs.
from

………………. Municipality / Corporation

BANK TRANSFER BOOK

From No. MCF 8

Date Purpose Cheque DEBIT CREDIT Initials of

of No. the
Transfer Gl Bank Amount GL Bank Amount Commr/
Folio Code Rs, Folio Code Rs. Asst
(1) (3) (4) (5) (6) (7) (8) (9) Commr
(Accounts)
(10)
Note: 1. All transfer of funds from one account to another shall be made by preparing a
fund transfer slop (MCF 7) and after making entries in this book.

3. While the debit and credit indicated as recorded in the bank scroll, postings in the
General Ledger in code no. 3100 are to be made as reflected in the records of
ULBS. It means the entry in the debit side will have to be posted on the credit side
of this code and vice versa as the recordings in this book are made as bring made
by the bank books.

Form No. MCF 9

DAILY COLLECTION STATEMENT OF PROPERTY TAX

From To
The manager, The manager
…………….. …………….
(collection bank) (Link bank)
………………… ……………….
Sir,
We have collected this day …………. (date of collection) Rs. ……………… (Rupees
…………………………) in our ……………………. Branch towards property tax

The details of bills / chalans collected are given below:

Sl. No. Division / Ward Bill no. Chalan no. Amount (Rs.)
(1) no. (2) (3) (4) (5)

Yours faithfully

Manager
Encl. Receipted chalans
Endorsement of Link Bank
Verified and given credit for Rs. …………….
Forwarded to the commissioner (Accounts Cell) , …….. Municipality / Corporation.

Manager Link Bank.

Instructions: M.C.F. 9 (Contd…)

1. This should be prepared in Triplicate – one to the Accounts cell a/w BRV, another
to the concerned section and the third copy retained in the Treasury.
2. Since Link Bank also collects the Property Tax, it is enough if this form meant for
Link Bank is printed and supplied in duplicate. The first copy with receipted
chalans will be sent by this bank to the commissioner.

………….. Municipality / Corporation

Form No. MCF 10 Date:

DAILY CHEQUE COLLECTION STATEMENT

Sl. No. Sl. No. Name Particulars A/c Cheque Drawn Amount Bank Ledger
in the of code no. & on Rs. chalan folio
register party no. Date no. & no.
of date
cheques
received

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Total

Manager /
Cashier Administrative Officer

Instructions:

1. This should be prepared in triplicate – one to the Accounts cell along with the
BRV, one to the concerned branch and the other copy retained in the Treasury.
2. Separate pay-in-slip / remittance chalan should be prepared for each cheque to
watch the realization of individual cheques.
Form No. MCF 11 …….. Municipality / Sl.No.
Corporation

PROPERTY TAX ADJUSTMENT SLIP

Enhancement New Assessment

Reduction Vacancy Remission

Division /
Zone No. Assessment No.
Address Ward No.
Date of final
Reference No.
assessment

Particulars Existing Proposed Half year

Rs. Rs. (+) )-)

Rs. Rs.

Annual Value

General Purpose
Water Supply
& Drainage
Tax

Education Tax

Library Cess

Total
No. of half Total Amount to be realised / adjusted
Increase Amount Decrease Amount Remissio
(Property Tax - (Property Tax - n Amount
years affected Recoverable) Recoverable) Reason Rs.

Form No. MCF 12 .......... Municipality / Corporation

REGISTER OF DISHONOURED CHEQUES

Sl Date Cheq Bank Reason Amo BPV A/c Sl. No. Mode Date Folio Initials
No. of e no. on for unt No. Code in the & of no. of of
Rt. & which disho (not register Date collec sub manag
From Date drawn nour Rs. paya of cheq of tion of ledger er
 bank le) for ues collec penalty for
reverse receiv tion and reverse
entry ed subseq amou entry
uently nt Rs.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

N.B.

1. The serial number entered in column 1 of this register should be ringed off only
when the penalty amount as fixed by the council for each dishonoured cheque is
collected and brought to account
2. This register will be maintained in the Municipal Treasury
3. Subledger referred to in col. 12 will mean Demand Registers for Property Tax,
Profession tax / Water charges, MDR for other revenue items etc.

Form NO. MCF 13 …….. Municipality

…….. Corporation

a. PROPERTY TAX
CHALAN REGISTER

Name of Revenue Asst. Date.

Collection Details of Property Tax

Sl. No. Asst. Period Amount Excess Rect.

No. Collec No. of
tion if revenue
any assist
rect.
book
Arrear Current Arrear Current
(1) (2) (3) (4) (5) (6) (7) (8)
Rs. Rs. Rs.

Total

Verified
W.r. to demand
Register

Revenue Asst. Tax clerk Shroff cashier / manager /

Ad.o.

Form NO. MCF 13 …….. Municipality

…….. Corporation

REVENUE FUND – CHITTA

S.No. Chalan Name Acco 1017 1018 1019 1029 1040 1044
 no. of the unt Trade
party code Licence PFA BL Survey TB Other
no. fee Rs Fee Fee Fees rent fees
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Total

Rupees …………………..

Shroff Manager / Admn. Officer

Form NO. MCF 14 …….. Municipality

…….. Corporation

b. Water Supply & Drainage Fund Chitta

S.No. Chalan Name Acco 1081 1082 1084 3014 3015 1044
 no. of the unt
party code
no.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Total

Rupees …………………..

Shroff Manager / Admn. Officer

Form No. MCF 14-a …….. Municipality / Corporation

a. Revenue Fund – Chitta Abstract

Date of Cash collection

Sl. A/c code Amount Ledger

No No. Head Rs. Folio
No.
1 3003
2 3002
3 4043
4 3005
5 3006
6 3011
7 1017
8 1018
9 1019
10 1054
11 1045
And so on
Total
1 3019
2 3013
Total
1 3020
2 3016
Total
Grand
Total

Denominations
500 x
100 x
50 x
20 x
10 x
5x
2x
1x
Coins
Total

Water supply chitta

Collection Total
N.R.Y. etc
Over all days
Collection

(Rs. In words ……………………………………….

1. Classifications checked
 2. Total cash collections physically
Verified and found to be correct

Shroff / Cashier Manager / Administrative officer.

Form No. MCF 14-b …….. Municipality / Corporation

b. Water supply & Drainage Fund Chitta Abstract

Date of Cash collection

Sl. A/c code Amount Ledger

No No. Head Rs. Folio
No.
1 1081
2 1082
3 1084
4 3014
5 3015
6 1044
7 1045
Where drainage
scheme is
functioning
8 1085
9 1086
And so on
Total

(Rs. in words ………………

Shroff / Cashier Manager / Administrative officer.

N.B. This total amount should be taken to the revenue fund chitta abstract to arrive at the
over all total collections of each day in the Treasury.

Instructions: (To be printed on the first page of the chitta register)

1. The chitta is to be maintained in register form

2. The sl. No. in column (1) of the chitta is for each days collections.
3. Chalan numbers are to be given serially on annual basis i.e. from April to March
4. There is no need to give chalan no. for collections by revenue assistants as they
are covered by chalan registers. So also collections made departmentally by staff
only serial no. in col (1) should be given.
 5. Account code no. must be noted both in the chalans presented by parties and in
column (4) of this register where the code no. is not printed separately
6. At the end of the day, an abstract should be prepared with code wise collections in
the form given above, in duplicate, one for the chitta itself and other for the bank
receipt voucher (BRV)
7. The classifications should be checked and then the BRV prepared by the Shroff
8. The overall abstract for RF collections, water supply collections, N.R.Y.
T.N.U.D.F. etc, shall be entered in the R.F. chitta itself and grand total struck.
9. The chitta for water supply & Drainage fund should be maintained separately
10. The denominations for the day’s grand total collections shall also be entered in
the R.F. chitta itself for purpose of cash verification by the manager /
administrative officer so that everything will be compact in one chitta itself.
11. The shroff will arrive at the details of components of property tax and the
education tax in the profession tax at approved percentages of levy at the end of
every day in the chitta and show in the abstract and arrange for remittances of
cash accordingly by separate pay-in-slips

Form No. MCF 15-a .......... Municipality / Corporation

Bills Inward Register

Sl Date Current From Parti Bill Date Gross Dedu Net BPV Types Initials
No. of no. in whom culars / amou ctions amou no. of JV of
Rt. personal recei Inv nt nt & & No depart
 register ved oice Date mental
no. Rs. Rs. Rs. officer
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

Guidelines

1. This should be maintained in the main office departments and zonal offices of the
corporations and in the various wings other than the accounts cell
2. This register will serve as an important record to provide for payments in the next
financial year ‘under liabilities’
3. The same register is prescribed separately for the accounts cell as MCF 15-b
4. This must be received periodically by the commissioner / P.a. to the commr. /
Asst. Commr (Zone)

Form No. MCF 15-b .......... Municipality / Corporation

Bills Inward Register

Accounts cell)

Month : Year:
Sl Date Sl. No. Dept. Bill Date Partic Gross Dedu Net BPV Initials
No. of in the from No. ulars amou ctions amou no. Acctt /
Rt. departm which nt nt & A.O.
ental recei Date
register ved Rs. Rs. Rs.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

Instruction: This register must be periodically checked by the commr. / P.A. to the
commr. / Asst. commr. (Zone)

Form No. MCF 18 ……………… Municipality /

Corporation No. Date

EXPENSES JOURNAL VOUCHER

Dept:

Party bill Date Bills Date Service

Name of party: no. inward order /
register agree
no. ment no.
BPV no. Account Account Ledger Debit Credit Narration
code no. head folio no. Rs. Rs. (Write
details of
claim)
(1) (2) (3) (4) (5) (6) (7)

Total
User Department / Claim Processing Department:

It is certified that the claim is in accordance with the order placed and the expenditure
claimed was checked with reference to the details available in file no. …….. / the
supplemental claim is made after checking the original relevant records and necessary
entries were made in the original records / service books etc.

The claim amount is within the approved budget provision and approved for payment.

Designation of the officer and Date

Enclosure: Abstract of salaries (MCF 16) / Party’s bill / Invoice

Accounts cell Details of recoveries / Folio no.
The bill was scrutinized and adjustment of advance etc
passed for payment of Rs. GL Ledger
….. only) by cheque after Folio no.
recovering / adjusting of Rs. Posted
……….. In advance recoverable
Acctt. A.O. Asst. Commr / register JA / Asst.
Commr.

Instructions MCF . 19

1.For all types of purchases whether inventory or non-inventory items, this journal should
be used.
2. If the purchase order is placed on the suppliers on annual contract basis and the
payments are made as and when supplies are received, an abstract of payments made upto
the previous bills is to be recorded on the reverse of the PJV every time till the contract
period is over so as to ascertain the progress of supply as well as the progress of
expenditure within the total amount of purchase order.

Abstract
Sl. Supplier’s BPV Amount Payment Quantity Balance Balance Remarks
No. Bill Date No. upto this received in the amount
No. Date Rs bill up to purchase available
Rs. this bill order
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

Officer in charge of the stores Accountant / A.O.

Form No. MCF 20 ……………... Municipality/ Corporation
No. Date
Dept CONTRACTORS’ JOURNAL VOUCHER

Project Code no.

Name of the contractor Name of M.Book no.

work Pages ….
Sl. Account Account BPV No Dr Cr Narration
No. Code Head Ledger
Rs. Rs. Folio
No.
(1) (2) (3) (4) (5) (6) (7)
1 3121/ Projects in
3122 Progress
A/c
2 4016 Tender
Deposit
Contractors
3 4035 Income tax
deductions
4 3053 Material
cost
recoverable
contractors
5 1058 Hire
charges for
tools &
plant
MCF 21
Part – II
DETAILS FOR PAYMENT

Value of Details of recoveries Part bill Net payment

work done previously
paid
(Rs.) (Rs.)
Already Now to be
recovered recovered
(Rs.) (Rs.)
(1) (2) (3) (4) (5) (6)

Previous

Present

--------

Total Total
Passed for Rs. (in words)
Rupees …………………

By cheque Rs. CJV No.

& Date
By adj Rs. ______
BPV no.
JE/AEE Total Rs. & Date Acctt / AO Commissioner
Engineer

Note: 1. Columns 3 + 5 will be equal to the previous value of work done in column 1
3. Columns 4 + 5 will be equal to the payment value of
work done in column 1
From No. 22 …………… Municipality
………………… Corporation

Dept
CONTINUATION SHEET OF CONTRACT BILL Bill No.

Name of the work

Estimate No.
Appropriation No. Project Code
Estimate Amount

Sl. No. Work Quantity Rate Per Amount Remarks

Description executed or Rs.
supplied
To Date Since Upto Since
Last date last
bill bill
(1) (2) (3) (4) (5) (6) (7) (8) (9)

Prepared by Checked by Approved by

JE AEE Municipal / Corpn. Engineer
Date; Date:
Form No. MCF 23 ……. Municipality / No. Date
Corporation
Fixed Asset Journal Voucher
Supplier / Completion Project Code Asset Description Compln. Date of
Contractor Certificate
no. Purchase
A/c code Account Dr Cr. Ledger folio no. Narration
Head Rs. Rs. (5)
(1) (2) (3) (4) (6)
Relevant 69
Account 1. Supervision charges value
code no. Projects in – of work done x 11 / 100=
progress A/c 2. Advt. Charges
3121 / 3. Laying in foundation
3122 expenses
4.Inaugural function
expenses
5. Professional charges
6. Installation charges
7. Levelling the ground
8. Repairs to vehicles and
other assets
9. …..
Total
1070 Interest
Value of work done x 2/100
x period of construction
1069 Projects
overhead
appropriation
expenses
1070 Projects (Cumulative construction
overhead cost at the beginning of the
appropriation year + half of the current
interest year cost) x interest rate of
the loan

3048 Wages to the

Technical
Assistant
Total
Prepared by Checked by Approved by Posted by Asset
JE / AE AEE Exe. Engr Register
Date Date Date Date Folio No.
Acctt. / A.O. Commr. / Asst. Commr (A/cs)
Instructions:

1. This must be prepared in duplicate – one with voucher, the other for the
department relevant file
2. This journal voucher should accompany the final bill / claim for bought out assets
3. On approval of this journal voucher, the Sl. No. in the Projects Ledger should be
ringed off in the Projects Ledger maintained in the Engineering Branch
4. In respect of repairs and maintenance carried out to the vehicles, plant and
machineries etc, the expenditure incurred to enhance the efficiency of these assets
at a particular point of time, if it is more than 10% of the original value of the
asset, or Rs. 10,000/- that amount should be capitalized
5. The calculation of interest on utilizing the loan should be from the date of work
order issued to the date of completion of work

Form No. MCF 24 …. Municipality / Corporation

ASSET REGISTER
Details @ Class: Sub class: Sub classification:
Location: Unit to measurement:

Date FAJV Descr Date Area Cost Addi Improv Dele Balance
No. iption of measur tions ement tions
const ment / cost cost cost
/ No.
purch
ase
Measu Cost Initials
rement of ME
No. / EE
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

@ The following details should be entered in the details’ column

Buildings Class of buildings, sub-classification, date of construction, location etc

Bridges, Culvert etc
Storm Water Drains
Electrical Installations
Cables
Electrical Installations
Lamp Posts
Heavy vehicles / light
Vehicles equipment
Sub-classification, date of construction, location etc
Date of construction, location etc
Sub-classification, location etc
Sub-classification, location & identification etc
Sub-classification, date of purchase, model make weight. Makers
identifying no.
(like engine no./ chassis no. etc)
Plants & Machinery etc Asset identifying no. etc
OHT – capacity – height as required for each kind of asset
Head waer works, reservoirs, channels, pumping stations, booster stations, ground water well
(diameter & length) Borewell, India mark II pumps, Public fountains.
Deletion would include disposals, transfers and sale of assets.

MCF 24 contd

Instructions: (To be printed on the front page of the register)

1. The maintenance of this register is the full responsibility of the engineering

branch, irrespective of the fact that the assets of different kinds are available in
various locations within the jurisdiction of the Municipality / Corporation.
2. The Municipal / Corporation engineer will arrange for annual physical
verification of all items of assets and take appropriate action where there is
discrepancy.
3. Acknowledgements should be obtained from the departmental officers in whose
custody the different assets are placed for their official use and kept in safe in the
engineering branch.
4. The value of assets in these register should always be at original cost
5. The annual description at prescribed rates shall be worked out in the depreciation
work sheet (MCF 37) and indicated therein their dimunition value
6. The entry in this register should be attested by the engineer
7. Separate asset register shall be maintained by the town planning officer for lands
8. Entries have to be made in this register category wise such as parts, noon meal
centers, hospitals and dispensaries, ward offices, high schools, higher secondary
schools etc
9. This register shall be maintained separately for each fund. Capital fund, waer &
Drainage fund and elementary education fund.
Form No. MCF 25 ….. Municipality Dept. Code

……. Corporation
REGISTER FOR JOURNAL VOUCHERS

Type of JV Financial 19…. To

Year …………….

Sl. No. Date Account Account Dr. Cr. Remarks Initials f

code no. head Acctt /
A.O.
(1) (2) (3) (4) (5) (6) (7) (8)

Instructions:

1. This register shall be maintained till the entire financial accounting system is
computerised
2. Separate pages should be set apart for each type of Journal Voucher, giving Sl.
No. for the financial year.
Form No. MCF 26 … …Municipality Issue price
……. Corporation (in red ink)

PRICED STORS LEDGER

Purchase order file no. Description Unit:

Maximum limit Minimum

of stock Re-order level:
Receipts Issues Balance
Date Name IMR Da Uni Rate Cost To IMI IMIN Date un Cost Units Cost Rem Init
of the N no te ts pric whom no. no. its price price arks ials of
supp e issu Date store
lier Rs. Rs. ed keeper
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (1 (13) (14) (15) (16) (17)
2)

Instructions:

1. This register is to be maintained only at cost price for inventory items (non –
consumable0
2. The issues are to be made on fifo method (first in first out)
3. The issue price should be worked out and shown visibly at the top of the page in
red ink. The issue price should be indicated only in the IMIN.
4. The entries for the consumables items like ALUM, bleaching powder, medicines,
fodder etc, shall be made in the stock registers maintained in the concerned
departments.
Form No. MCF 27 … …Municipality Sl. No
……. Corporation
INVENTORY MATERIAL RECEIPT NOTE

‘Stores’ Supplier Date:

Purchae order file no. ……………… Ref: To delivery chalan / Note and
………………………. Date
……………………….
Sl. No. Description Unit Quantity Unit rate Value of Remarks
of items received Rs. materials
(1) (2) (3) (4) (5) (6) (7)

Stores Accounts cell

Prepared Checked Folio no. Approved Checked by.
by by in stores by Jr. Asst
ledger Accountant
/ A.O.

Instructions:

1. This must be maintained in a book form with pre-printed serial nos

2. It must be prepared in duplicate – one to be sent to engineering branch for being
enclosed to the PJV for adjustment of advance or for payment
MCF 28 ……. Municipality / Corporation

INVENTORY MATERIAL INDENT & ISSUE NOTE Sl. No.

Date:
Item no. Name Mate Unit Quan Acco Qty Rate Value Refer
of rial tity unt issued ence
work descry requi code to
with iption red folio
the Rs. Rs. in
name PSL
of
contr
actor
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Store keeper Approved by Acknowledgement for

Indenting official with with date receipt of materials
designation and date
Quantity
Municipal
Engineer /
Signature and
City engineer designation with date
Instructions

1. This should be maintained in book form and prepared in triplicate handing over
one to the indenting official, one to the accounts cell with journal vouchers and
another to the retained in stores.
2. Materials issued to be contractors should cover the cost price, transport charges,
loading / unloading charges, storage charges and margin
3. The issue rates in all cases must be in whole rupees
4. The difference between the recovery rate and the issue price shall also be treated
as other income. If the recovery rate is lesser than the issue price, the difference
shall be charged to the works to which the materials were issued.
5. The question of fixing issue price taking certain elements such as storage charges,
margin etc, may not arise in the case of materials issued for departmental works
and it is enough in these cases if the cost price is adopted for issue of materials.
Form No. MCF 30

Dept …….. Municipality / Corporation Stores Sl. No.

Stores Return Note Date:

Return by whom: ………………………

Sl. No. Mater A/c IMIN Qty Qty Amount Refer
ial Code no. & return accep ence
descry date ed ted Cost Other stores
iption Price incide ledger
ntals
cove
red
in
issue
price
(1) (2) (3) (4) (5) (6) (7) (8) (9)

User Department Stores Section

Prepared by Checked & Returned by Received by Accepted by

Indenting officer with

Designation & date: Store Keeper Stores officer

MCF 30 contd

Instructions:

1. Columns 1 to 5 to be filled up by department by which the stores were received

2. Columns 6 to 9 to be filled up in stores section
3. Out of 3 copies, after making entries on the receipt side of the priced stores
ledger, one will be issued to the department which returned the materials, one to
the engineering branch for preparing CJV and for sending to the accont cell and
other one retained in stores.
4. This must be in a book form with pre-printed serial numbers and printed in
triplicate
5. All retrieved materials by replacement with new ones shall be returned to the
stores by following the existing procedure and for making entries in the register of
unserviceable articles.
Form No MCF 31 ………… Municipality Sl.No.
…………. Corporation

Dept Stores Adjustment Slip Date:

Sl. Mater A/c Qty as per

No. ial Code stores ledger Reaso Rate Plus Minus
Descr Balance Quantity ns Rs. Rs. Rs.
iption before
adjust Plus Minus
ment
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Stores Section Accounts Cell

Prepared by Checked and Checked by Posted in

Approved by Value records
Stores
Storekeeper Stores officer Jr. Asst Accountant / A.O

Instructions:

1. This should be printed in duplicate with pre printed numbers

2. Out of two copies prepared by stores, one should be sent to the engineering
branch for proposing necessary CJV and for sending the same to the Account Cell
for adjustment.

From no. MCF 32 ………… Municipality File No.

…………. Corporation

PROJECTS LEDGER

Executing Project Source Sanc No. Date

dept Description of tion
finan on
cing refer
ence
Project Code Asset code Folio Projc 3121 Estimate
no. in ts in 3122 no.Date
asset prog
regist ress Amount of
er code estimate
no

Sl. Date Date Date of Date CJV / PJV Dire Det Amo Indi Proj FAJV Dtd.
No. of comm of ct ails of unt rect ect no. & Initi
work ence comp cost indi cost cost date als
order ment letion rect inte capi of
exec or cost Rs. rest talis engi
uted purc ed ner /
hase Rs. Acct
/
A.O
No Date
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)

Instructions:

1. This ledger will be maintained by the engineering branch

2. Every time, a new project or work is taken up for execution on issue of work
order, the project code no. should be allotted
3. The project code no. should be given for a calendar year and not for the financial
year
4. Separate project leader shall be maintained for capital works under capital fund
and water supply and drainage works under water supply and drainage fund.

Form No MCF 33 ………… Municipality Page No.

…………. Corporation
Unserviceables Stock Register

Sl. Date Mate Order Qty Book Ref to Ref to Value Rem Dt.
no. rial in value folio auction of arks Initials
descry which no. in sales of
iption treat stores engineer
ed as Rs. ledger Rs.
unserv / asset
iceable ledger
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

Form No MCF 34 ………… Municipality Page No.

…………. Corporation

General Ledger

A/c Codeno. A/c Head Month

Date Dept BRV / Journal Narration Dr. Cr. Net Balance

code BPV
no. no. Rs. Rs.
Type No. Dr. Cr.

Instructions:

1. Separate folios should be set apart for each account code for recording the
transactions consecutively for 12 months with progressive monthly totals
2. In cases where there are debits and credits, they should be recorded in the same
folios of the respective codes and not in separate folios
3. Only the net balance of debit or credit should be arrived at, at the end of each
month, duly attested by the accountant / Accounts officer
4. The net balances of each code no. should be taken to the monthly trial balances.

Form No MCF 35 ………… Municipality

…………. Corporation

Depreciation Work Sheet

Sl. No. Class Asset Opening Addit ion Delet Balance Rate of Depre
of code no balance during ions on depreci ciation
assets as on the year during which ation Amount
Rs. Rs. the depre Rs.
year ciation
 Rs. is
calcula
table
(4+5-6)
(1) (2) (3) (4) (5) (6) (7) (8) (9)

Prepared by Checked by Approved by EJV No Received

Date Checked and
Asst A.E.E Engineer Taken to A/c
Date Date Date Acctt / A.O.

Form No MCF 36 ………… Municipality

…………. Corporation

Project Expenditure Statement For the Month ….. 19

Sl. Proje Execu Proj Estim Esti Comm Asset Expe Expe Expr. Expr. Progre
No. ct ting ect ate mated ence code cted cted Up to Durin ssive
code dept descr cost date ment date over previ g the Expr
iption of month of run ous month
comp / year comp month
letion letion Rs. Rs. Rs.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

Note:
This should be prepared in triplicate – one for accounts cell, one for engineering branch
and third for sending outside as and when required for review meeting.

Form No MCF 37 ………… Municipality

…………. Corporation

Trial Balance as on …………….

A/c code Account head Dr Cr

 Total

Notes: (To be printed on the front page of the ledger)

i) The RF/CF/WS/SF/EE etc, should be used for preparation of this statement

for revenue fund and capital fund (one) water supply and drainage fund (one)
and E.E. fund separately, all in duplicate.
ii) This form should be filled up with code nos.
iii) In respect of corporations, the zonal office trial balance should be prepared
separately and included in the consolidated trial balance of the corporation by
providing columns for each zone and main office in a separate register for this
purpose
iv) A statement showing the abstract of receipts and expenditure with a bank
reconciliation statement shall be annexed to the trial balance, both for the
main office and the zonal offices.
v) Where two or more bank accounts are maintained for one fund like revenue
fund, a chart showing the abstract of receipts and expenditure and the
differences in the book balances and the bank balance in individual bank
accounts shall be prepared and enclosed to the trial balance.

From No. AF 1A ---------------- Municipality / Corporation

Abstract
Income and expenditure Account for the year ended 31st march------
Expenditure

Actuals Revised Budget Amount

previous year Code Account head Estimate Current year
Rs. No. Rs.
(1) (2) (3) (4) (5)
A Personnel Cost
 (i) Salaries
(ii) Others
B Terminal and
retirement
benefits
C Operating
expenses
D Repairs &
maintenance
E Programme
expenses
F Administrative
expenses
G Finance
Expenses
H Depreciation

TOTAL

Instructions to fill up the above heads:

1. In order to have bird’s eye view of the detailed Income and Expenditure account,
an abstract of Income and expenditure account has now been prescribed with the
major heads by the alphabets
2. The alphabets ‘A’ to ‘H’ shall cover the detailed account code numbers as
specified below:
A. Personnel Cost:

(i) Salaries : 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011

To make it more clear, all personal claims made through pay bills will come under this
head

(ii) Others : 2012, 2013, 2014, 2025, 2042, 2051, 2055

B. Terminal and Retirement Benefits :2031, 2032, 2033, 2034, 2035, 2039, 2053

C. Operating Expenses :2043, 2084, 2086, 2088, 2089, 2090, 2091,

2092, 2096, 2100, 2101, 2102, 2107, 2108,
2109, 2110, 2119, 2120, 2121, WS2087
D. Repairs & Maintenance :2016, 2049, 2050, 2070, 2071, 2072, 2073,
2074, 2075, 2076, 2077, 2078, 2079, 2080,
2081, 2085, 2122, 2123, 2124, 2125, 2128,
2129

WS 2128 & 2129. E 2126

E. Programme Expenses :2052, 2056, 2064, 2065, 2103, 2105, 2106

F. Administrative Expenses :2015, 2107, 2018, 2019, 2020, 2024, 2026,

2040, 2046, 2047, 2048, 2054, 2061, 2062,
2083, 2095

G. Finance Expenses :2021, 2022, 2023, 2027, 2028, 2029, 2030,

2036, 2044

H. Depreciation :2037, 2038

From No. AF 1A (contd) ---------------- Municipality / Corporation

Abstract
Income and expenditure Account for the year ended 31st march------
Income
Actuals Revised Budget Amount
previous year Code Account head Estimate Current year
Rs. No. Rs.
(1) (2) (3) (4) (5)
A Property tax

B Other taxes

C Assigned
revenue
D Devolution
fund
E Service charges
and fees
F Grants &
contribution
G Sale and hire
charges
H Other income

TOTAL

Instruction

The alphabet heads have to be filled up with the code nos. indicated under each head

A. Property Tax : 1001, WS 1002, E 1003, 1005

B. Other Taxes
C. Assigned revenue
D. Devolution fund
E. Service charges and fees
: 1006, 1007, 1008, 1009, 1010, 1011
: 1046, 1047, 1048, 1049, 1050
: 1053
: 1016, 1017, 1018, 1019, 1020, 1021,
1024, 1025, 1026, 1029, 1032, 1039,
1044, 1054, 104, 1080, 1081, 1080,
1082, 1083, 1084, 1085, 1086

F. Grants & Contribution : 1051, 1052, 1072, 1087

G. Sale and hire charges
H. Other income`
: 1057, 1058, 1059, 1060, 1061, 1062,
1063
: 1022, 1023, 1027, 1028, 1030, 1031,
1033, 1034, 1035, 1036, 1037, 1038,
1040, 1041, 1042, 1043, 1045, 1055,
1056, 1065, 1066, 1067, 1068, 1069,
1070, 1071, 1073, 1074, 1075, 1076,
1077, 1078, 1079
Form No. AF 1B _________________ Municipality / Corporation

Detailed Income & Expenditure Account for the year ended 31st March ------------

Expenditure

Actual Revised Amount

Previous Code no. Account Head Budget current year
year Estimate Rs.
Rs. Rs. (5)
(1) (2) (3) (4)
3001-2011 Pay, DA,HRA,CCA,CA,
Conv. allowance
2012 Travel expenses
2013 Leave travel concession
2014 Supply if uniform
2015 Telephone charges
2016 Light vehicle
maintenance
2017 Legal expenses
2018 Stationary and Printing
2019 Advertisement charges
2020 Other expenses
2021 Property tax vacancy
remission
2022 Provision for doubtful
collection of revenue
items
2023 Revenue items – written
off
2024 M.O. Commission
(Pension)
2025 Conveyance charges
2026 Computer operational
expenses
2027 Interest charged by the
bank
2028 Bank charges
2029 Interest on loans / ways
and means advance /
overdraft
2030 Lapsed deposit – refund
2031 Pension / family pension
2032 Commutation
2033 D.C.R.G
2034 S.P.F.G.S
2035 G.J.S.- Management
contribution
2036 Audit fees
2037 Loss on sale of asset
2038 Depreciation
2039 Pension contribution to
the pension fund
2040 Municipal contribution to
other funds
2042 Hospital stoppages /
reimbursement of
medical expenses
2043 Expenses on food
sampling
2046 Books and periodicals
2047 Postage and telegrams
2048 Electricity consumption
charges for office
buildings
2049 Office building –
maintenance
2050 Repairs and maintenance
of office tools and plants
2051 Training programme
expenses
2052 Professional chares
2053 Pension and L.S.
contributions
2054 Contributions
2055 Staff welfare expenses
2056 Exhibition expenses
2061 Sitting fees for the
councilors
2062 Council department –
Travel expenses
2063 Expenses on hospitality
and entertainment
2064 Expenses on opening
ceremonies
2065 Election expenses
2070 Heavy vehicle
maintenance
2071 Repair & Maintenance –
 Roads & pavements –
concrete
2072 Repair & Maintenance –
Roads & pavements –
Black topping and
asphalt
2073 Repair & Maintenance –
Buildings
2074 Repair & Maintenance –
Subways & Cause ways
2075 Repair & Maintenance –
Bridges and flyovers –
2076 Repair & Maintenance –
Storm water drain, open
drains & culverts –
2077 Repair & Maintenance –
Plant & Machinery –
2078 Road cuts
2079 Maintenance of nutritious
meal centres
2080 Maintenance for
improvements to slum
areas
2081 Maintenance charges for
railway level crossings /
Over bridges
2084 Maintenance of garden /
parks
2085 Plants & Implements etc
2086 Power charges for
sewerage system /
pumping stations
2087 Power charges for water
head works pumping
stations / booster stations
2088 Power charges for street
lights
2089 Maintenance expenses
for street lights
20920 Wages
2091 Stores – written off
2092 Petrol / Diesel
evaporation
2095 Survey charges
2096 Removal of debris
2100 Expenses on sanitation /
 conservancy
2101 Scavenging materials
2102 Pauper charges
2013 Fairs and festivals
2015 Improvements to
compost yard
2106 Anti-filaria / Anti malaria
operations
2107 Medicines
2108 Rent on buildings
2109 Hospital expenses other
than medicines
2110 Diet to patients
2119 Fodder (animal feed)
2120 Zoological gardens –
maintenance
2121 Running of libraries /
Reading rooms
2122 Maintenance of lodging
houses / rent houses / TB
/ IB
2123 Maintenance of kalyana
mandapams / community
hall / town hall / kalai
arangam
2124 Cinema Theatre –
maintenance
2425 Maintenance expenses –
schools/water supply/
sewerage
2126 Maintenance expenses –
elementary schools
2128 Royalty
2129 Maintenance charges to
TWAD board / Metro
Water board
2130 Hire charges for supply
of water through private
lorries / Tankers
Net Surplus of the year

From No. AF 1B (contd) ---------------- Municipality / Corporation

Income and expenditure Account for the year ended 31st march------
Income
 Actual Revised Amount
Previous year Code Account Head Budget current year
Rs. no. Estimate Rs.
(1) Rs. (5)
(3) (4)
(2)
1001 Property tax for –
general purposes
1002 Water supply and
drainage tax
1003 Education tax
1005 Excess remittance –
property tax and other
items
1006 Profession tax
1007 Pilgrim tax
1008 Tax on carriages and
animals
1009 Tax on carts
1010 Servant tax
1011 Advertisement tax
1016 Fees under places of
public resorts etc
1017 Trade licence fees
1018 Lincece fees under
P.F.A. Act
1019 Building licence fees
1020 Encroachment fees
1021 Parking fees
1022 Market fees – daily
(annual lease)
1023 Market fees – weekly
(annual lease)
1024 Private market fees
1025 Fees for advertising on
lamp posts
1026 Fees for bays in bus
stand
1027 Fees for slaughter
house (annual lease)
1028 Cart stand fees (annual
lease)
1029 Survey fees
1030 Cinema theatre income
1031 Road development
charges
1032 Fees for fishery rights
1033 Rent on and lease of
lands
1034 Income from ferries
1035 Income from fairs &
festivals
1036 Rent on shopping
complex
1037 Rent for community
hall
1038 Rent on buildings
1039 Fees on pay & use
toilets (annual lease)
1040 Rent from travelers
bungalows & rest
house
1041 Road cut – restoration
charges
1042 Avenue receipts
1043 Demolition charges for
unauthorized
construction
1044 Other fees
1045 Other income
1046 Duty on transfer of
property
1047 Entertainment tax
1048 Magisterial fines
1049 Compensation for toll
1050 Assigned revenue
1051 Grant for natural
calamities
1052 Grant for schemes
implementation
1053 Devolution fund
1054 Copy application fees
1055 Dishonoured cheques
charges
1056 Law charges and court
cost recoveries
1057 Profit in sale of assets
1058 Hire charges
1059 Sale of rubbish / debris
 / silt
1060 Sale of compost
manure
1061 Sale of stock and stores
1062 Sale of scraps
1063 Sale of products
1064 Receipts from hospital
and dispensaries
1065 Pension and leave
salary contributions
1066 Miscellaneous
recoveries
1067 Interest on investments
1068 Interest from bank
1069 Project overhead
appropriation –
expenses
1070 Project overhead
appropriation - interest
1071 Interest on staff
advances
1072 I.P.P.V. – grant
1073 Deposits forfeited
1074 Deposits lapsed
1075 Dividend on shares
1076 Insurance claim
amount
1077 Rent on bunk stalls
1078 Garden / park receipts
1079 Income from road
margins
1081 Initial amount for water
supply new service
connections
1082 Income for giving new
water supply service
connections
1083 Metered / tap rate
charges
1084 Charges for water
supply throughout
lorries
1085 Septic tank cleaning
charges
1086 Sewerage connection
 charges
1087 Specific maintenance
grant – water supply
Net deficiency for the
year
Total

Form no. AF II ………………… Municipality / Corporation

Balance Sheet as on 31st March ……

As at
Previous year Code no. Liability Rs.

(1) (2) (3) (4)

LIABILITIES
4003 Ways & means advance
4004 Loans from government
4009 Overdraft
4005 Loan from HUDCO
4006 Loan from TUFIDCO
4007 Loan from TNUDF
4008 Loan from bank
4010 Diversion from other
municipal fund
4011 Contribution from municipal
fund
4012 Contribution from private
party
4013 Contribution from
Government
4014 Grants from Government
4061 to 4074 Accumulated Depreciation
Account Schedule – ‘A’
4078 to 4086 - do -
4001 Accumulated surplus /
deficit
CURRENT LIABILITIES
4016 Tender deposit – contractors
4017 Tender deposit – suppliers
4020 Deposit – others
4018 Security deposit - revenue
4019 Security deposit - staff
4015 Advance collection of taxes
& non taxes
4043 Library cess payable
4021 to 4034 Recoveries from staff pay
bills payable – schedule ‘B’
4059 Handloom advance
recovered – payable to co-
opted
4060 Khadi advance recovered –
payable to khadi board
4076 ENTYCE advance recovered
4039 Provision for doubtful
collection of revenue items
4041 Water supply & Drainage tax
(1) & (2) payable (Current and arrears)
4041 Education tax payable
(1) & (2) (Current and arrears)
4044 Salaries payable
4045 Unpaid salaries
4046 Accounts payable account –
personal claims
4047 Accounts payable account -
Contractors
4048 Accounts payable account –
Suppliers
4049 Accounts payable account –
Expenses
4050 Other payables
4051 Interest payable account
4087 Other items
OUTSTANDINGS
4035 I.T. Deduction from
contractors
4036 Other recoveries
4037 Sales tax and surcharge on
sales tax – payable
4038 Power charges payable –
street light
4040 Survey charges – payable
4052 G.I.S. management
contribution
4053 Contribution to the CMDA /
LPA payable
4054 Municipal contribution to
specific schemes
 4055 Road cut restoration deposit
– telephone department
4056 Road cut restoration deposit
– others
4057 Water supply maintenance
chares payable to TWAD
Board / Metro water board
4058 Royalty payable
4075 Maintenance charges for
railway level crossings /
overbridges payable
4077 Inter zonal transfer account

Form no. AF II ………………… Municipality / Corporation

Balance Sheet as on 31st March ……

As at
Previous year Code no. Assets Rs.

(1) (2) (3) (4)

FIXED ASSETS
3101 Land
3102 Buildings
3103 Subways & Causeways
3104 Bridges & flyovers
3113 Roads & pavements – concrete
3114 Roads & pavements – black topped
3115 Roads & pavements – others
3105 Storm water drains, open drains and
culverts
3106 Heavy vehicles
3107 Light vehicles
3108 Other vehicles
3109 Furniture, fixtures and office
equipments
3110 Electrical installations – lamps / tube
light fittings
3111 Electrical installations – others
3112 Plant & machinery
3116 Instruments & equipments in
Hospitals & Dispensaries
3117 Tools and plants
3118 Public fountains
3121 Projects – in – progress account
3122 Projects – in – progress – Government
 Grants
3132 Water supply – head works, OHT etc.
& water supply mains
3133 Drainage pipes, conduits
3134 Ground water wells / deep bore wells
3135 Hand pumps India mark II
3136 Reservoirs
3138 Other items
3137 Sullage water removal tankers
3149 Drainage fees from building flat
promoters
3150 Under ground drainage scheme –
initial deposits
CURRENT DEPOSITS
3001 Specific stock
3002 Property tax – recoverable - current
3003 Property tax – recoverable – arrears
3004 Property tax collection suspense
account
3005 Profession tax – recoverable – current
3006 Profession tax – recoverable – arrears
3007 Other taxes – recoverable – current
3008 Other tax – recoverable – arrears
3009 Lincece fees and other fees –
recoverable – current
3010 Lincece fees and other fees –
recoverable – arrears
3011 Lease amounts - recoverable – current
3012 Lease amounts - recoverable – arrears
3013 Water supply and drainage tax –
receivable
3014 Water charges recoverable – current
3015 Water charges recoverable – arrears
3016 Education tax – recoverable
3017 Rent on buildings recoverable -
current
3018 Rent on buildings recoverable –
arrears
3019 Water supply & drainage tax
receivable – arrears
3020 Education tax receivable – arrears
3024 Construction cost recoverable
3023 Specific grant receivable
3026 Road cut restoration – telephone
department – recoverable
3027 Road cut restoration – others –
recoverable
3021 Accounts receivable – sale of
properties
3022 Survey fees receivable
3048 Wages to technical assistants
3049 Collection of arrears of taxes –
doubtful
3050 Collection of arrears of non-taxes
(fees) – doubtful
3056 Deposits – recoverable
3025 Interest accrued on fixed deposit /
dividend due on shares
3028 to 46 Staff advance recoverable (schedule
‘C’)
3047 Interest on staff advances –
recoverable
3071 Pension & leave salary contribution
receivables
3052 Advances to the contractors
3051 Advances to the suppliers
3131 Advance to TWD / Metro water board
3053 Materials cost recoverable –
contractors
3054 Advance recoverable – expenses
3055 Other advances – recoverable
3125 Advance to PWD / highways etc
3058 General imprest account
3059 Cash on had
3060 to Cash at bank ……. Collection bank
3063
3066 to Cash at bank ……. Payment bank
3067
3064 Cash at bank ……. Devolution fund
3070 Fixed deposit
3100 Inter fund transfer
3123 to 24 Cash at bank ……. Capital fund
3068 Cash at old bank
3069 Elementary education fund …. Bank
3139 to 40 Water supply & drainage fund …
bank
3141 Drainage fees collected from building
flat promoters ……. bank
3142 Underground drainage scheme –
initial deposits …… bank
 3065 P.D. account – Treasury
3126 M.P. Fund – Bank account
3127 M.L.A. Fund – Bank account
OTHER ITEMS
3057 Prepaid expenses
3072 Miscellaneous recoveries receivable
3073 Accumulated depreciation investment
3128 Deferred revenue expenditure
3129 Basic amenities scheme – bank
account
3130 National slum development
programme – do
3152 Decentralised district plan - do

Schedule A to balance sheet

Statement on Net block as on 31st march ……..

Code no. Descrip tion Net block Addition / Deprecia Cum Net block
asset deletion tion depreci as of
during the during the ation upto 31.3….
year year the year
(1) (2) (3) (4) (5) (6) (7)
3102 Buildings
3013 Subways &
Causeways
3104 Bridges &
flyovers
3105 SWD, open
drains and
culverts
3106 Heavy
vehicles
3107 Light
vehicles
3108 Other
vehicles
3109 Furniture,
fixtures &
office
equipemen
ts
3110 Electrical
insallations
– lamps &
tube light
 fittings
3111 Electrical
installa tions
- others
3112 Plant &
machinery
3113 Roads &
pavements –
concrete
3113 Roads &
pavements –
black topped
3115 Roads &
pavements –
others
3116 Instrucments
&
equipments
in hospitals
and
dispensaries
3117 Tools &
plants
3118 Public
fountains
3132 Headwork,
OHT etc,
water supply
mains
3133 Drainage,
sewerage
pipes,
conduits etc
3134 Ground
water wells /
deep bore
wells
3135 Hand pump
– India mark
II
3136 Reservoirs
3137 Sullage
water
removal
tankers
TOTAL
AF II (Cont)

………. Municipality / Corporation

Schedule B to balance sheet

Recoveries from staff pay bills – payable

Code no. Account Head Amount

Rs.
4021 P.F. Recoveries
4022 Co-operative society loan
4023 RD / CTD recoveries
4024 L.I.C. policies – Premium recoveries
4025 Special provident fund-cum-Gratuity scheme –
recoveries
4026 F.B.F. / Group Insurance scheme recoveries
4027 External housing recoveries
4028 Deputationist recoveries
4029 Income tax deduction at source from employees
4030 Bank loan recoveries
4031 Court recoveries
4032 H.B.A., special F.B.F. subscription
4033 Health fund subscription
4034 Recoveries to other municipalities
4036 Other recoveries
4059 Handloom advance recovered – payable to co-optex
4060 Khadi advance recovered – payable to khadi board
4076 ENTYCE advance recovered
TOTAL Rs.
AF II (Cont)

………. Municipality / Corporation

Schedule C to balance sheet

Staff Advances

Code no. Account Head Amount

Rs.
3028 Festival advance
3029 Handloom advance
3030 Khadi advance
3031 Education advance
3032 Flood advance
3033 Immediate relief – advance
3034 Advance for solar cookers
3035 Tansi advance
3036 Advance of T.A. to the family to the deceased
employee
3037 Tour advance
3038 Advance of pay and T.A. on transfer
3039 Warm clothing advance
3040 Calculator advance
3041 Computer advance
3042 Bicycle advance
3043 Motorcycle advance
3044 Car advance
3045 Marriage advance
3046 House building advance
TOTAL Rs.
From No. AF IV

………. Municipality / Corporation

Endowment Fund Account for the year ….

Receipts and Payments Account

Receipts Payments
Date Details Rs. Date Details Rs.
To By Expenditure
Balance on Objects /
Investment …… purposes for
Cash at bank ….. which endowment
created
(prizes, functions
etc)
To Investment on By Investments
Fixed Deposit
To Income form By Postages etc
endowed
properties
To Other Income By maintenance
of Choultries /
buildings
endowed
To Contribution By
by Donors (for Balance
creating new Investment …….
endowments) Cash at Bank …...
Total Rs. Total Rs.

Accountant / Accounts Officer Commissioner / Asst. Commissioner (A/cs)

SCHEDULES FOR PREPARING THE OPENING BALANCE SHEET
 Schedule No. 1

________________ Corporation / Municipality Division No. ____________

LAND

Land owned, acquired or purchased by the Corporation / Municipality

Sl. no. Sur Loc Owned Extent Docu Usage Present Rate Total
vey ation or (area) ment as per status per value
no. acqui acre or details record of the Sq.M
red / cent or land
purch ground
ased / or
alienat sq.m
ed
gifted Rs. Rs.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Instructions for filling up the columns

1. All the lands in the name of the ULB including those areas which were recently
merged with the Corporation / Municipality should be included without omission.
2. In the column, ‘present status of the land’, if there is an unauthorized encroachment it
should be specifically mentioned.
3. All the lands on which buildings and other assets in schedule no. 2, to 4,8,10,11 and 19
should necessarily find place here
4. The valuation of all kinds of land should be as per the recognition norm given in
Volume II
 Schedule No. 2

________________ Corporation / Municipality Division No. ____________

BUILDINGS

Buildings owned, constructed or transferred by the Corporation / Municipality

Sl. Name Loca Total Plinth Name Usage Year Cost Deprec Total
no. of the tion area area of of the of of iation value
build of of the const build comp const allow as on
ing the build ruction ing letion ruct ed 31.3….
site ing ion at
the
time
of
comp
letion
Rs. Rs. Rs.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

Instructions for filing up the columns:

1. Individual items of building with details to be furnished
2. Buildings have to be classified as class ‘I’ or class ‘II according to the PWD
norms.
3. The valuation of all kinds of buildings should be as per the recognition norm
given in Volume II
 Schedule No. 3

________________ Corporation / Municipality Division No. ____________

BRIDGES, CULVERTS, FLYOVERS, SUBWAYS AND CAUSEWAYS

Sl. no. Locat Area Year of Cost of Written Net Remarks

ion constr constr down value as if any
(name if uction uction value of on
any) depreci 31.3…
ation as
on
31.3….
Rs. Rs. Rs.
(1) (2) (3) (4) (5) (6) (7) (8)

Note: Separate sheets may be used for

(i) Bridges & culverts

(ii) Subways & Causeways
(iii) In respect of flyovers, where the flyovers are constructed and handed over to
the Corporation / Municipality they may be furnished separately.
 Schedule No. 4

________________ Corporation / Municipality Division No. ____________

Storm Water Drains including Open Drains

Sl. no. Year of Name of Width of Length .Total Written Net

constr the road the drain of the cost down value as
uction & street drain value of on
in which depreci 31.3…
the ation as
drains on
are 31.3….
available Rs. Rs Rs.
and used
(1) (2) (3) (4) (5) (6) (7) (8)

Note:

(i) The term ‘Storm Water drain’ shall include retaining wall, ordinary side open)
drains and used for collecting drainage water from residence / complex.
(ii) The term does not include ‘Sewerage Mains’ for which separate information
should be furnished.
(iii) The value of land over which the storm water drain is constructed should not
be taken.

Schedule No. 5

________________ Corporation / Municipality ZONE/ Division No. ____________

Vehicles

Sl. Regis Make Date User Purpo Origi Written

no. tration Number of pur depar se for nal down
no. Engine Chasis chase tment which cost value
no. no. used Rs. as on
31.3….
Rs
Note:
(1) In the above categories, animal drawn carts, three wheelers and other vehicles that
could not be classified as Heavy vehicles or Light vehicles are to be accounted
under other vehicles.
(2) The cost of bulls may also be furnished separately with the following details:

Date of purchase
Cost of purchase

Schedule No. 6

________________ Corporation / Municipality Division No. ____________

Furniture, Fixtures and Office equipments

Sl. no. Name Quantity Rate at Year of Total Depre Written

which purchase purchase ciation if down
purcha cost any value of
sed depreci
ation as
on
31.3….
Rs. Rs. Rs
(1) (2) (3) (4) (5) (6) (7) (8)

Note:

(i) Separate sheets may be used for schools, offices, hospitals, dispensaries,
residential quarters etc
(ii) All particulars should be furnished with reference to Tools and Plant register
and actual verification only
(iii) It is important that all other amenities provided in the local body’s quarters
that are occupied by the officers like A.C., Aircooler, Gaisers etc are
accounted for
(iv) Intercoms provided for use in the office at the cost of the Municipality are to
be listed out here
(v) Individual items whose present worth is above Rs. 1,000/- and above may be
listed. Items of value of Rs.1000/- or less may continue to find place in the T
& P register and not here. This is applicable in the case of single item only.
This will not apply to common items of furniture, chairs, tables etc,whose
individual value might be less than 1000/-
 Schedule No. 7

________________ Corporation / Municipality Division No. ____________

Plant & Machinery

Sl. no. Name No. Year of Cost of Written

purchase purchase down
value as
Rs. on
(1) (2) (3) (4) (5) (6)

Note:
(i) All items in the engineering, public health and other departments specially meant
for them should be described here.
(ii) Electrical machines and other machineries that are meant for water supply and
sewerage purposes may be furnished separately. The items available in the Head
works, pumping stations, Booster stations, OHT are to be furnished separately for
Water Supply and Drainage Fund Account.

Schedule No. 8

________________ Corporation / Municipality Division No. ____________

Roads, Streets and Lanes

Sl. no. Name of Nature Length Breadth Year of Total Written

the road of the in metres in metres comple value down
road iton value as
on 31.3.
Rs. Rs.
(1) (2) (3) (4) (5) (6) (7) (8)

Note:

(i) The schedule may be prepared w.r.t. register of Roads and on actual
measurements at present.
 (ii) Separate sheets need not be used for metal roads, C.C. roads, B.T.roads or
Earthen road. It is enough that this schedule is prepared for each division with
out any omission
(iii) The value or the cost involved in the formation relaying etc, should alone be
taken in account. The value of land on which such roads are formed need not
be taken. Since the same is taken at a token value in the Land schedule.

Schedule No. 9 (a)

________________ Corporation / Municipality Division No. ____________

Electrical Cables

Sl. no. Division Locat Year in which New Value Written Remarks
no. ion / cables were laid cables down
Name laid in value
of the Year K.M. K.M. as on
road
(1) (2) (3) (4) (5) (6) (7) (8) (9)

Note:

If no cable was provided at the cost of the municipality, this schedule will be NIL
 Schedule No. 9 (b)

________________ Corporation / Municipality Division No. ____________

Lamp Posts and Luminary Fittings

Sl. Name Kind Year New Original Lumi Posts Lumi Value
no. of the of in lights Value nary Value nary
road / light which added Posts fitt fitt
street provi lights ings ings
ded provi Rs. Rs. Rs. Rs. Rs. Rs.
ded
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

Note:

(i) If the lamp posts were provided by the TNEB based on payment of estimate
charges covering the cost of lamp posts and also if they replaced at its cost
their value need not be included here.
(ii) Luminary fittings provided by the municipality should be included here
(iii) Lamp post provided within the Municipal areas such as parks, etc such cost
should be included

Schedule 10

Substations (Transformers)

Sl no. Location Description Number Original Written

value down value
as on
(1) (2) (3) (4) (5) (6)

Note:
 If no substation is owned by the Corporation / Municipality, a NIL statement may be
given.

Schedule No. 11

________________ Corporation / Municipality Division No. ____________

List of Capital Works in Progress

Sl. Name of the Source of Year in Estimated Total Remarks

no. scheme finance which amount expend
sanctioned iture as on
(1) (2) (3) (4) (5) 31.3… (7)
(6)

Note:

(i) If the scheme or the capital work is executed with the aid of Government
loans or grant, it may be specified so, with G.O. number and date
(ii) If it is undertaken from the Municipal fund, it may be indicated as from own
source
(iii) Even in case, the work is not commenced after the estimate was sanctioned,
and all formalities were observed for commencement of work but for some
reason or other work order was not issued, the information as such, may be
furnished and the column (6) above may be kept blank. (This is required for
opening the projects ledger)

Schedule No. 12

________________ Corporation / Municipality Division No. ____________

INVESTMENTS

Opening Balance as on …….

Sl. no. Name of the Date of Date of Amount of Maturity
bank or Insti deposit maturity Deposit value
tution or Rs. Rs. Rs.
Post office
(1) (2) (3) (4) (5) (6)
Note:
Investments under revolving fund, endowment fund, special provident fund etc, need
not be included here

The details deposits paid to the Telephones Department for provision of telephones
and the current consumption deposits paid to the Tamil Nadu Electricity Board have
to be gathered and shown in a separate statement – vide code no. 3056 and included
in the opening balance sheet.

Schedule No. 13

________________ Corporation / Municipality Division No. ____________

INVESTMENTS

Name of the Institution _____________

Closing Stock on 31.3…..
Sl. no. Name of the Closing stock Closing stock Remarks
material quantity value Rs.
(1) (2) (3) (4) (5)

Note:

(i) It is necessary that closing stock under Revenue Account and Capital Account
is shown separately, because in the new system of Account there is a separate
Account called Capital Fund Account
(ii) Stock in the General stores, General workshops etc, may be furnished in
separate schedules.
(iii) The stock of materials which are of consumable nature such as fodder for
animals , bleaching powder, phenyl, medicines etc, need not be included in
this schedule
(iv) List of contractors to whom materials were issued for execution of works
earlier to 31.3….. but this cost is pending recovery from their contract bills
should be shown separately with their value in code no. 3053
 Schedule No. 14

________________ Corporation / Municipality

_______________ Department.

List of Advances paid to the suppliers

Amount of ending
advance as
Sl. no. Name of Nature Quantity Amount Date of Quantity Account
the of ordered of payment
supplier purchase advance
(1) (2) (3) (4) paid (6) (7) (8)
(5)

Note:

1. Separate statements may be furnished department wise

2. The staff advances need not be included in this schedule
3. Advances paid to the contractors, suppliers, staffs for purchase of certain items
required for office use or for other varied purposes and other advances have to be
gathered separately.

Schedule No. 15

________________ Corporation / Municipality

Bank Balances as per cash books

Sl. no. Name of bank / Account Closing balance Remarks if any
treasury number as on 31.3. as
(1) (2) (3) per cash book (5)
(4)

Note:
 (i) The balance as on 31.3…… should be the balance as per the cash book, not
as per the Bank Scroll or Treasury Pass Book which is covered by Bank
Reconciliation.
(ii) Cash Balance on hand on ……………… may be indicated at the end.

Schedule No. 16

________________ Corporation / Municipality

Property Tax, Profession Tax, Other Taxes, Fees etc

Recoverables

Total Arrears
Sl. no. Div 1997- 1997- 1996- 1996- 1995- 1995- Prior Total
no. 98/II 98/I 97/II 97/I 96/II 96/I years
(1) (2) (3) (4) (5) (6) (7) (8) to 95- (10)
96/I
(9)

Note:
(i) This statement should be prepared with reference to the balance arrived as on
31.3…. in the Arrear Demand Registers and Current Demand Registers
(ii) Separate statement may be used for
Property tax
Profession tax
Trade licence fees
Fees under PFA act
Leases
Rent on buildings / shops etc

(iii) All the above items may be totaled and furnished in an abstract agreeing to the
figures shown in the DCB statement for the year ended 31.3…
 Schedule No. 17
________________ Corporation / Municipality

List of Grants Due from the Government as on 31.3…….

Sl. no. Name of the Year Total Amount of Ref.no. in

scheme expenditure grant due which it is
incurred claimed /
Rs. Rs. proposed to
be claimed
(1) (2) (3) (4) (5) (6)

Note:

(i) All grants that are committed by the Government are to be furnished
(ii) In case, the grants that are sanctioned but the amount not credited as on
31.3.2000 should find place here.
(iii) For eg, for the expenditure incurred in the year 1997-98, the grant is due in
1998-99 only. But such items should also find place here, because the
expenditure is incurred upto and including 31.3.98 and on which there is a
legitimate claim by the Corporation / Municipality. So this is a case of amount
recoverable.
(iv) All grants due under M & C.W., Anti-malaria / Anti-filaria andIPP-V schemes
should be listed out.

Schedule No. 18

________________ Corporation / Municipality

Employees’ Advances Pending Recovery as on 31.3…….

Sl. no. Name of Nature of Year in Total Total Remarks

the advance which amount amount
department sanctioned sanctioned pending as
(1) (2) (3) (4) (5) on (6) (7)
Note: If the details are many, separate sheets may be used for individual kind of advances

Schedule No. 19

________________ Corporation / Municipality

Assets of Water Supply and Drainage Schemes / Branch

Sl. no. Nature Location Descrip Month Total Depreci Net

of asset tion with and year value ation value as
measure of Rs. allowed on
ments, comple Rs. 31.3….
area, tion Rs.
diameter
(1) (2) (3) (4) (5) (6) (7) (8)

Instructions:
Separate sheets may be used for different kinds of assets mentioned below;

1. Resorvoirs
2. Head water works
3. Open well works
4. Open wells with pump sets
5. Deep bore wells
6. Bore well s with pump sets
7. India mark II pumps / hand pumps
8. OHTs
9. Reservoir transmission / distribution system
10. Conduits, channels etc
11. Water supply mains in KMs / Meters (roadwise / street wise may be token and
totaled)
12. Public fountains (location wise and street wise and then totaled)
13. Drainage / Sewerage mains in Kms (road wise and street wise and then totaled)
14. Sewerage pumping stations
15. Quaters in Reservoirs, Head water works etc
16. Any other assets (specify location)
 Schedule No. 20

________________ Corporation / Municipality

Any other kind of Asset or Recoverable

Sl .no. Nature of asset Period to which Amount due Remarks

or recoverable it relates Rs.
or claim
(1) (2) (3) (4) (5)

Note:

(i) The road formation charges that were spent form revolving fund, but still not
recoverable from the house / plot owners may be detailed here
(ii) All endowment assets like buildings, lands, F.D. N.S.C. etc may be included
here under the separate heading ‘ENDOWMENTS’
(iii) The Water Supply & Drainage Tax and Education Tax components of
Property tax receivable from the general fund have to be shown under the
respective funds.
 Schedule No. 21

________________ Corporation / Municipality

Loans Pending Repayment as on 31.3….

Sl. Particu G.O. Original Purpose Date Balance of Amount Penal

no. lars of & loan of loan of interest
loans Date amount credit pendings as interest for
on due belated
31.3…2000 payable repayment
pending as on of
31.3.200 instalment
of laon
(1) (2) (3) (4) (5) (6) (7) (8) (9)

Note:

(i) As the liability as on 31.3.2000 has to be precisely assessed, the interest due
on 31.3.2000, may be proportionally worked out and indicated incase the
annuity is repayable in the course of the year
(ii) In cases, where the loans are not at all repaid, or belatedly repaid, the element
of penal interest has to be known. So, in such cases, the rate of penal interest
mentioned in the Government order may be ascertained and worked out for
the period till 31.3.2000 and specifically mentioned in RED INK in column
(9) under interest due.
 Schedule No. 22

________________ Corporation / Municipality

Deposits Repayable

Sl. no. Nature of Year Amount of Remarks

deposit deposit /
repayable
(1) (2) (3) (4) (5)

Note:

The deposits repayable have to be grouped and shown separately under five categories

1. Tender Deposits Contractors All EMDs additional deposits paid by and

2. Tender Deposit Suppliers
3. Security Deposit Revenue
4. Security Deposit staff
5. Deposits – Others
collected from the Contractors for
execution of various works
Deposits paid by the suppliers for
satisfactory completion of supply contracts
All deposits paid for leases, auctions, bids,
servicing etc
All other items not covered under above
four categories.
 Schedule No. 23

________________ Corporation / Municipality

List of Outstanding Bills as on 31.3…. (Liabilities)

Sl. no. Name of the Nature of Suppliers’ Stock Amount

claimant claim bill No. or account page payable on
M.Book. no. ………..
No. and file
(1) (2) (3) no. (4) (5) (6)

1. The details of bills or invoices received before 31.3.2000 / yet to be received for
supplies and services made before 31.3.2000.. have to be gathered from all
departments / sections and included in the schedule.
2. All arrears of personal claims / retirement benefits due for payment before
31.3.2000 …. But pending payment for some reason or other have to be
ascertained and included in the schedule.
3. A register of liabilities under the following headings has to be opened and
maintained till they are finally settled

i) All personal claims

ii) Payments to the contractors
iii) Payments to the suppliers
iv) For all other expenses such as electricity bills, telephone bills, repairs
and maintenance, water charges / maintenance charges payable to the
TWAD board etc.
 Schedule No. 24

________________ Corporation / Municipality

List of Any other Liabilities as on 31.3.2000

Sl. no. Name of the Nature of claim Amount Records / reference

claimant claimed and no. by which the
payable liability was
(1) (2) (3) (4) established
(5)

Note:

The Group Insurance Management contribution including those working in the Nutritious
Meal center, contribution payable to the CMDA/LPA, audit fees TNIUS Coimbatore, 2/3
establishment charges payable to the survey and Land records Dept (Town surveys) etc,
have to be worked out and included in the schedule. This should also includes the
unutilized grants.