Types of Gratuity

● Death Gratuity: This is a one-time lump sum benefit payable to the nominee
or family member of a Government servant dying in harness. There is no
stipulation in regard to any minimum length of service rendered by the
deceased employee.
● Retirement Gratuity​: This is payable to the retiring Government servant. A
minimum of 5 years' qualifying service and eligibility to receive service
gratuity/pension is essential to get this one time lump sum benefit.
● Service Gratuity: A retiring Government servant will be entitled to receive
service gratuity (and not pension) if total qualifying service is less than 10
years.

Que:2  Describe  the  system  of  Demand  For  Grants  in  the 
Railways.  How  is  the  Budget  Classification  aligned  with 
the Accounting Classification? 

{Reference: IR Finance Code; Volume-I; Chapter-3; Para- 305 to 307 (Demand For Grants)} 

Demand  For  Grants  (DFG),  is  the  form  in  which  estimates  of  expenditure  from 
Consolidated  Fund  of  India  (CFI),  included  in  the  Annual  Financial  Statement  and  required 
to be voted upon in Lok Sabha. 

The salient features of DFG in Railways are as follows. 

1. After  merger  of  Railway  Budget  with  General  Budget,  DFG  for  Railways  falls  under
Demand No:83 of General Budget.
2. Expenses  are  broadly  grouped  by  activities  as  an  aid  to  developing  budgets  and
analysing actual expenses against budgeted expenses.
3. Expenses  and  Receipts  are  grouped  into  Major Heads. Expenditure is categorised in
both voted and charged expenditure.
4. Revenue Expenditure:
a. Major Head 3001 covers all Railways.

5 
 

 
 

b. Major  Head  3002  &  3003  are  for  individual  Railway  administration.  It  is 
further  divided  into  12  Sub  Major  Heads  (SMHs).  These  expenses  get 
incurred  on  Repair  and  Maintenance,  Operations,  Staff  Welfare  and 
Retirement Benefits and Railway Funds. 
5. Capital Expenditure 
a. Major  Head  5002  &  5003  are for individual Railway administration. These are 
utilised  for  Assets-  Acquisition,  Construction  and  Replacement.  It  is 
subdivided into 14 Plan Heads. 
b. These  activities  are  funded  by  Railway  Funds,  Budgetary  Support  and  Extra 
Budgetary Resources. 

Particular  Allocation  Major Heads/ Classification 

3001​:  Indian  Railways  -  Policy  Formulation,  Direction, 

Research and Other Miscellaneous Organisations 
3002​:  Indian  Railways  -  Commercial  Lines  -  Working 
Revenue  Expenses 
Expenditure  3003​: Indian Railways - Strategic Lines - Working Expenses 
3006​: Appropriation from Railway Surplus 
3075​: Other Transport Services 

5002​: Capital Outlay on Indian Railways - Commercial Lines 

Capital 
5003​: Capital Outlay on Indian Railways - Strategic Lines 

1001​: Indian Railways - Miscellaneous Receipts 

1002​:  Indian  Railways  -  Commercial  Lines  -  Revenue 
Receipts  Revenue 
Receipts 
1003​: Indian Railways - Strategic Lines - Revenue Receipts 

Budget Classification vis-a-vis Accounting Classification 

6. Budget  classifications  have  been  completely  aligned  with  the  Accounting 

classifications.  
a. The  system  is  simple  in structure and is intended to analyse ​revenue expenses 
by  activities  for  management/parliamentary  reporting  and  by  primary  units 
for  expenditure  control  at  the  responsibility  cost  centres  where  the 
expenditure is incurred.  
b. For  ​Works  Expenditure​,  the  classification  provides  a  direct  link-up  with  the 
Plan heads.  

 
6 
 

 
 

c. The  functional  orientation  of  both  the  Budgetary  Demands  for  Grants  and 
the  accounting  classification  ensures  a  complete  concordance  between  the 
sub-heads  of  the  Demand  for  Grants  and  ​minor  heads  of  accounting 
classification  on  the  one  hand  and  the  ​detailed  activity  classification  of  the 
Demands  for  Grants  with  the  ​Sub  heads  of  Accounting  Classification  on  the 
other.  
7. Each Demand has three sub-divisions:  
a. Sub-Heads​ of the Demands representing major functions/activities 
b. Detailed  Heads  representing  a  further  break-up  of  the  activity  of 
classification i.e. identifying ‘why’ of the expenditure in greater detail.  
c. Primary  Units  ​(Objects  of  Expenditure)  identifying  'what'  the  expenditure 
denotes i.e. Salary, Wages, Allowance, Materials etc 

 
7 
Que:4  Discuss  the  importance  of  Revenue  Allocation 
Register and Monthly Financial Reviews. 

{Reference:  1​​ IR  Accounts  Code;  Volume-I;  Chapter-3;  Para-  312  (Revenue  Allocation  Register) + IR 
Finance Code; Volume-I; Chapter-5; Para- 512 (Revenue Allocation Register); 

IR Finance Code; Volume-I; Chapter-5; Para- 513 (Monthly Financial Reviews)} 

2​

Revenue Allocation Register 

● It is a Subsidiary Book kept by each Accounting Circle.

● It is an Abstract of Revenue Expenditure under Working Expenses.
● In  these  registers,  the  transactions  are  posted  separately  for  expenses,  whether  by
Cash  Payment  or  Book  Adjustments  (both  are  type  of  Accounting  Transactions),
which are adjusted to the final heads (a) directly, and (b) through Demands Payable.
● Importance​:  The  object  of  these  registers  is  to  keep  the  heads  of  divisions,  and
departments  informed  of  the progress of expenditure against the allotments placed
at  their  disposal  by  the  General  Manager,  which  should  be  entered  in red ink in the
appropriate  columns  provided  for  in these registers, so as to form a ready means of
comparison and check with the outlay.

Revenue Allocation Register (Abstract A/B/C/……./N) 

Detailed Heads of Accounts…………… 

Allotment for the Year………….. 

8 
 For the month of ………. 20……. 

Primary 
Particulars of  Voucher  Units of 
SN  Total  Serial No.  Remarks 
Transactions  (No. Date)  Revenue 
Classification 

1  2  3  4  5  6  7 

Monthly Financial Review 

● It  shows  the  expenditure  to  the  end  of  the  previous  month, 
against the allotment placed at the disposal of the controlling authorities under
each sub-head of the grant for which they are responsible.
● Column 4 of the below table is obtained from Revenue Allocation Register.
● Monthly Financial Reviews are prepared by the Divisional/ Workshop/  Construction
Accounts officers concerned for each Division/Workshop/Construction Unit and the
FA&CAO arranges for the consolidation of these reviews into the Monthly Financial
Review for the Zonal Railway.
● Importance:
○ It  is  prepared  to  observe  that  the  periodical  expenditure  is  in 
accordance with the proportionate budget allotment
○ Also  to observe the correlation assumed between receipts and expenditure,
in the preparation of the budget is maintained.

Format for Monthly Financial Review 

Expenditure upto Apr-2020 

Sub-Heads  more (+) or less (-) 
Budget  Proportionate  Actual  Actual 
of 
allotment  Budget  Expenditure  Expenditure 
grant and  As  As 
for  allotment to  to End of  to End of 
heads of  compared  compared 
2020-21  end of Apr’20   Apr’20​*  Apr’19 
account  with  with 
Column-3  Column-5 

1  2  3  4  5  6  7 

* taken from Revenue Allocation Register

9 
  

 
 

Que:5  What  is  Works,  Machinery  and  Rolling  Stock 

Programme? Explain the Significance of each? 

{Reference:  IR  Finance  Code;  Volume-I;  Chapter-3;  Para-  359,  362  &  366  (Works,  Machinery  and 
Rolling Stock Programme)} 

Works,  Machinery  and  Rolling  Stock  Programme  (WM&RSP)  is  an  explanatory 
memorandum  to the Budget which contains the ​detailed estimates of ​Capital Expenditure 
with  Plan  Heads  and  its  deliverable  for  each  railway  administrative  unit​.  It  is  presented  to 
the Lok Sabha and the Rajya Sabha. 

WM&RSP contains detailed distribution of the Budget allocation made to the Railway 
Administrations  for  Capital,  Capital  Fund  (CF),  Depreciation  Reserve  Fund  (DRF), 
Development  Fund  (DF),  Safety  Fund  (SF),  Rashtriya  Rail  Sanraksha  Kosh  (RRSK)  and  Extra 
Budgetary Resources (EBR). 

WM&RSP  is  listed  in  the  ​Pink  Book  of  each  year  for  every  administrative  unit  of 
Railways i.e. Railway Board, Zonal Railways, Production Units, and other units. 

The  Budget  allotment  made  to  a  railway  administration  is  intended  to  cover  all 
charges,  including  the  liabilities  for  past  years,  to  be  paid during the year or to be adjusted 
in  the  accounts  for  it.  It  shall  be  operative  until  the  close  of  the  financial  year.  Under  the 
'doctrine  of  lapse'​,  any  unspent  balance  shall  lapse  and  shall  not  be  available  for  utilization 
in the following year. 

Capital Expenditure (Works, Machinery and Rolling Stock Programme) 

Plan  Source of Funds 

Particulars 
Head 
Capital  CF  DRF  DF  SF  RRSK  EBR 

11  New Lines               

21  Rolling Stock               

33  Signalling and Telecommunication               

Works 

35  Electrification Projects               

 
10 
  

 
 

41  Machinery and Plant               

71  Stores Suspense               

72  Manufacture Suspense               

73  Miscellaneous Advances               

For example:  
Plan Head 21 
(Rolling Stock) 

SN  Particulars  Allocation  Sanctioned  Exp. at the  Revised  Outlay 

Cost  end of  Outlay for  Proposed 
Mar’19  2019-20  for 2020-21 

    Capital/ CF/         
DRF/ DF/ 
SF/ RRSK/ 
EBR 

Significance: 

● WM&RSP  contains  deliverables  of  each  Plan  Head,  where  a  specific  sum  is  allotted 
for expenditure. 
● A lumpsum amount is allotted by the General Manager for all deliverables.  
● Any  reappropriation  in  excess  of  the  sum  allotted  for  an  individual  deliverable 
requires the prior sanction of the General Manager. 

Que:6 Explain the difference between- 

(a) Commercial and Government Accounts: 

{Reference: IR Accounts Code; Volume-I; Chapter-2; Para- 201,220, 221 and 222 (Commercial and 
Government Accounts)} 

 
11 
In  ​Commercial  Accounting​;  the  financial  transactions  of  a  commercial  concern  should be 
recorded in such a way as to show  

● how its capital has been utilised,

● how it stands in relation to its debtors and creditors,
● whether it is gaining or losing,
● what the sources of its gains or losses are, and
● whether it is solvent or insolvent.

In  ​Government  Accounting​;  the  main  requirement  is  that  a  systematic  record  of  all 
receipts  and  expenditure  classified  under  certain  appropriate  headings,  should  be 
available.  

Government Accounting  Commercial Accounting 

Government accounting norms  Compliance with international standards 

Statement of Receipts and Expenditure  Trading Accounts, P&L and Balance Sheet 
only 

Modified Cash basis of accounting  Accrual accounting 

Spending and expense budgets  Sales and profit driven budgeting 

Lines of appropriation, Heads, Demands  Lines of business 

No written down values of assets  Commercial asset valuation 

Indian  Railways  is  a  departmental  Commercial  Enterprise.  Thus  it  follows  Commercial  as 
well as Government Accounting. There are three Account Heads (Suspense Heads) which
act as the link between Commercial and Government accounting. These are 

● Demands Payable
● Labour
● Traffic Accounts

12 
 

 
 

 
 

(b) Capital and Revenue Accounts: 

{Reference: IR Accounts Code; Volume-I; Chapter-2; Para- 202 (Capital and Revenue Accounts)} 

The  accounts  of  a  railway  presented  in  such  a  form  as  to  facilitate  a review of the finances 
of the railway as a commercial undertaking are known as ​“Capital and Revenue Accounts”​. 

Capital Accounts  Revenue Accounts 

Revenue  transactions  are  those  which 

Capital  transactions  may  be  broadly 
relate  to  the  working  of  the  railways, 
described  as  those  which  pertain  to  the 
comprising  both  earnings  and  working 
acquisition of concrete assets. 
expenses 

In  Railways,  Capital Receipts include Capital 

Support  from  General  Revenues,  Extra  In  Railways,  Revenue  Receipts  include 
Budgetary  Resources  and  Railway  Funds  majorly  Misc  Receipts  (1001);  Revenue 
(DRF, CF, DF, RRSK, SF).  Receipts (1002 & 1003) 
Capital  Expenditure  includes  majorly  Revenue Expenditure include majorly Policy 
Assets-Acquisition,  Construction  and  Formulation  (3001)  and  Working  Expenses 
Replacement  under  Plan  Heads  (5002,  (3002, 3003). 
5003), Loan to Govt Servants. 

Capital  Account  Current  is  prepared  on  a  Revenue  Account  Current  is  prepared  on  a 
monthly  basis  to  capture  these  Head  monthly  basis  to  capture  these  Head 

 
13 
  

 
 

details for each accounting circle.  details for each accounting circle. 

*​Account  Current  is  simply  a  statement  showing  the  receipts  and  disbursements  of  an 
accounts  circle,  duly  classified  under  the  prescribed  heads  of  account.  Both  Account 
Currents  are  prepared  on  the  line  of  Classification  in  Government  Accounts.  ​{Reference: 
Accounts Code, Vol. I, Chapter-2, Para 208} 

(c) Demands Payable and Miscellaneous Advance: 

{Reference:  IR  Accounts  Code;  Volume-I;  Chapter-2;  Para- 220 & 223 (Demand Payable and Misc. 

Advance)} 

Both are a type of Suspense Head of Accounts. 

Demands Payable (DP)  Miscellaneous Advance 

It  is  an  Account  Head  which  is  used  to  link 
It  maintains  transactions  for  Debit  Head  of 
Commercial  and  Government  Account  of 
Suspense Accounts.  
Railways. 

These  are  revenue  liabilities  for  a  month  which  All  items  are  current  and  are  recoverable  in  cash 
are  not  payable  within  the  same  month  are  or otherwise adjustable. 
brought  to  account  as  working  expense  for  the 
month  by  taking  contra credit to Suspense Head  Sufficient  documentary  evidence  exists  to support 
“DP”.  recovery or adjustments. 

When  liabilities  are  actually  discharged  this 

suspense  head  is  debited.  Balance  at  the  end of 
The  items  in  this  Head  are  closely  monitored 
the  month  represents  liability  of  Railway 
and steps taken to clear immediately. 
incurred  but  not  actually  discharged  during  the 
month. 

E.g.  1​​ Charges  the  allocation  of  which  is  not known 

or  which cannot immediately be adjusted to a final 
head;  2​​ Inter-departmental  transactions  awaiting 
E.g.  1​​ Special  contribution  to  the  State  Railway PF 
acceptance;  3​​ Expenditure  incurred  for  other  than 
and  gratuties;  2​​ Settlement  dues;  3​​ Supply  of 
Government  Works  in  anticipation  of  receipt  of 
Sundry materials. 
deposits  or  pending  realisation  of  the  amount 
expended;  4​​ Payments  made  in  advance  for  stores 
to be supplied.  

 
14 
 (d)Commutation of Pension and Family Pension
Both of these come under post-retirement benefits. 

Commutation of Pension  Family Pension 

A  Railway  Servant who is due to retire and desires 
payment  of  commuted  value  of  pension  being  It  is  a  Pension;  which  is  given  to  the  immediate 
authorized  at  the  time  of  issue  of  PPO  (Pension  family  member  i.e.  wife/husband  post  enhanced 
Pay  Order)  itself,  may  apply  for  commutation  of  family pension period. 
pension  along  with  pension  papers  prior  to  the 
date of retirement. 
Value of commutation = Commutation Value from the table x 12 x Amount of pension commuted
Commutation  will,  however,  not  be  allowed  if  the 
It is 30% of Last Basic Pay and Dearness Relief. 
employee dies before retirement. 

The  maximum  amount  of  pension  granted  may 

be  commuted  to  the  extent  of  40%  at  the 
discretion of the employee. 

The  Commutation  of  Pension  shall  be  valid for 10 

years.  If,  however,  the  pensioner  is alive for more 
than  15  years,  the  commuted  portion  of 
pensioner will be restored after 15 years. 

(e) Provident Fund Ledger Account and Unposted PF Ledger Account

{Reference: IR Accounts Code; Volume-I; Chapter-9; Para- 906 & 915 (Provident Fund Accounts)} 

Both  of  these  are  used  to  maintain  Provident  Fund  Accounts  of  a  PF  subscriber.  PF  is 
statutory obligation on part of employees as well as the employer government department. 

Provident Fund Ledger Account  Unposted PF Ledger Account 

For  an  individual  subscriber,  a  ledger  account  is  There  are  events  where,  a ledger account remain 
maintained  which  records  transaction  of  unposted in case of employee concerned 
subscriber  in  Credit  and  Debit  side  after receiving  ● is  transferred  to  another  department  or
PF Journal.  section  within  same  circle  or  to  another
account circle;
● or  no  pay  has  been  drawn  for  employee
concerned
These  PF  transactions  related to these events are 
recorded  in  the  ​Register  of  Unposted  Ledger 
Accounts​. 

In  case  of  transfer  within  the  same  accounts 

circle,  register  of  unposted  items  will  show  the 

15 
  

 
 

items to be posted. 
In  case  of  transfer  outside  the  accounting  circle, 
steps  should  be  taken  to  transfer  the  Ledger 
account to the account circle concerned. 

(f) Gross Traffic Receipts and Net Traffic Receipts 

{Reference:  Report  No.1,  2018_CAG  Report  on  Finance  Audit  on  Railways  Finances,  Chapter-1, 
Page-1&2) +  

IR Finance Code, Chapter-3, Para-308 (Glossary of Terms)}  

Gross Traffic Receipts (GTR)  Net Traffic Receipts (NTR) 

GTR  represents  earnings  actually  realised  during  NTR  represents  Net  Revenue;  which  is  calculated 
an  accounting  period.  GTR  is  summation  of  by  
following items:-  NTR(Net  Revenue)=  GTR-TWE  (Total  Working 
(a) Passenger Earnings (less refunds)  Expense) 
(b) Other Coaching Earnings (less refunds) 
(c) Goods Earnings (less refunds) 
(d) Sundry other Earnings (less refunds) 
(e) Suspense 

GTR  including  Capital  support  from  General  NTR  represents  Excess  or  Shortfall.  If  it  is  excess, 
Budget  and  Extra  Budgetary  Resources is used for  the amount is appropriated to DF, CF and RRSK. 
Total  Working  Expenses  (inclusive  of  DRF  and 
Pension  Fund)  and  Appropriation  to  Development 
Fund(DF), Capital Fund(CF) and RRSK.   

*DRF: Depreciation Reserve Fund 

**RRSK: Rashtriya Rail Sanraksha Kosh 

 
16 
 PERFORMANCE BUDGETING AND ZERO BASED BUDGETING
Performance Budget used to be part of Indian Railways upto 2016 Rail Budget. However Zero
Based Budgeting is no followed at all in Zero Based Budgeting.
After merger of Rail Budget with General Budget in 2017, Performance Budget is not released as of
now.
Performance Budgeting
Outcome and Performance Budget of Railways
placed for any particular budget year, bring out
the achievements/highlights that the railway
has tried to deliver up to two years preceding
the budget year. (C&AG)
Performance cum Outcome Budget attempts to
give a better insight in to the multifarious
activities of the railways that, when combined,
generate the outcome of transportation services.
Performance cum outcome budget seeks to
report on the Outcomes of the Rail services in
terms of through put, financial results, addition
to capacity, and outcomes for the traveling
public and rail users.
Performance Budget includes Financial and
Physical Performance in terms of receipts and
expenditure, Passenger and Freight
performance; and OOO (Outlay-Output-Outcome)
w.r.t. CAPEX.
Zero Based Budgeting (ZBB)
Advantages
• Efficient allocation of resources, as it is based
on needs and benefits.
• Drives Managers to find cost effective ways to
improve operations.
• Detects inflated Budgets.
• Useful for especially Service Departments like
Telecom, Railways etc, where the output is
difficult to identify.
• Identifies and eliminates wasteful and
obsolete operations.
• Eliminates the “spend it or lose it” mentality of
traditional budgets/incremental budgets.
Zero Based Budgeting (ZBB)
In traditional budgeting (incremental
budgeting), Managers justify only increases over
the previous year’s budget and what has been
already spent is automatically sanctioned. No
reference is made to the previous level of
expenditure.
By contrast, in Zero-based budgeting, every
department function is reviewed
comprehensively and all expenditures must be
approved, rather than only increases.
ZBB requires the budget request be justified in
complete detail by each Manager starting from
the Zero-base.
The zero based is indifferent to whether the
total budget is increasing or decreasing.
ZBB is especially encouraged for Government
budgets because expenditures can easily run out
of control if it is automatically assumed what
was spent last year must be spent this year.
Disadvantages
• Difficult to define decision units and decision
packages.
• Time consuming and exhaustive.
• Difficult to understand and communicate the
budgeting because more managers are
involved in the process.
• Forced to justify the every detail related to the
expenditure.
 CONSOLIDATED FUND AND CONTINGENCY FUND

Consolidated Fund of India (CFI) Contingency Fund (CtFI)

Estd. under Article 266 of Constitution of India. Estd. under Article 267 of Constitution of India.

According to Article 266 of the Constitution of
India, the Central Government has a
consolidated fund entitled the “Consolidated
Fund of India”, into which flow all the revenues
received by the Central Government and form
which all expenditure of the Central
Government is met when so authorized by the
Parliament in accordance with law.
Unforeseen expenditure which cannot be met by
re-appropriation from the existing grant and
expenditure on a “New Service /New
Instrument of Service " not contemplated in the
budget, can be met from out of the balance in the
Contingency Fund of India placed at the disposal
of the Member (Finance). (Para 382 of Finance
Code Vol-I)

It is like a permanent imprest kept with the

executives.
In this part of the Account there are three main It is used only if Parliament is not in session. If
divisions, namely: (1) Revenue, (2) Capital and CtFI is used by executive, then it is automatically
(3) Debt (comprising public Debt and Loans and recouped in next session of Parliament.
Advances)
The first division (Revenue) deals with the The expenditure should be of the kind which
proceeds of taxation and other receipts, classed was not anticipated in Budget and now it can’t
as revenue and the expenditure there from. be postponed which have serious implication to
In the case of the Railways, the Traffic Earnings safety or efficiency.
are the main source of revenues and railway’s
Total Working Expenses (TWE) is an example
for the expenditure met from this fund.
The second division (Capital) deals with
expenditure incurred with the object of
increasing assets of a material character also
and also receipts intended to be applied as a set-
off to capital expenditure. (Demand No: 16)
The third division comprises, so far as Railway
Accounts are concerned, of loans and advances
made by Government together with the
repayments of the former and recoveries of the
latter.
However after merger of Budget, Railway is a
department of government and gets Gross
Budgetary Support and not loans.
In which flow all the revenues (for the railways
traffic earnings are the main source of income)
received by the Central Government, loans
raised by the Government by the issue of
treasury bills, loans or ways and means
advances, and moneys received by the
Government in repayment of loans and form
which all expenditure of the Central
Government is met when so authorized by the
Parliament in accordance with law.

CHARGED EXPENDITURE

Art 113(1) of the constitution states that charged expenditure upon the Consolidated Fund of India
(CFI) shall not be submitted for the vote of Parliament. Either House of Parliament may discuss
such expenditure, after which funds are sanctioned by the President.

For Railways, the following expenditure is charged on the CFI-

1. The salary, allowances and pension payable to or in respect of the Comptroller and
Auditor General of India;
2. Any sums required to satisfy any judgement, decree or award of any Court or awards by
Arbitrators where made into rule of court ; and
3. Any other expenditure declared by the Constitution or by Parliament by law to be so
charged.

SUNDRY EARNINGS

These earnings are Non-Coaching Traffic and Non-Goods Traffic. These are non-traditional
earnings. In Railways these are classified in Abstract ’Z’. These earnings are related to Divisions
thus are not apportioned with other zones.

Earnings of IR = Abstract ‘X’ + Abstract ‘Y’ + Abstract ‘Z’

Earnings + Suspense = Receipts

Abstract ‘X’ Abstract ‘Y’ Abstract ‘Z’

Coaching Earning
• Passenger (including Military)
• Special trains and reserved
carriages
• Luggage
• Parcels
• Other Coaching Traffic
• Transport of Post Office Mails
• Misc. Coaching Receipts
• Refunds of Earnings collected
Goods Earning Sundry other Earnings
• Fuel • Telegraph
• General merchandise • Rent and tolls
• Military Traffic • Leasing charges of Land and
• Livestock Building
• Railway Materials • Commercial publicity/
• Misc. Goods Earnings Advertisement
(Demurrage and Wharfage) • Catering Contracts: IRCTC
• Refunds of Earnings collected Pantry Car Haulage Charges
• Overhead charges and profits
recovered on work done for
outside parties and on sales of
stores.
• Sale proceeds of grass and
trees
• Interest and maintenance
charges on assets etc.
• Reimbursement of operating
loss on Strategic lines
• Retiring Room, Rest house,
• Misc: RELHS Book Stalls,
 Residual value of Laptop, RRB

DESCRIBE IN BRIEF THE VARIOUS STAGES OF BUDGETARY REVIEW. WHAT HAS BEEN
THE IMPLICATION OF MERGER OF RAILWAY BUDGET WITH GENERAL BUDGET??

(Para-383 & 385 of IRFC Vol-I)

Budgetary Review: There are specified intervals at which review of behavior of Receipts and
Expenditure vis-a-vis Budget Estimates are to be done.

There are two main intervals of Budgetary Review, 1st is RE (Revised Estimates) Stage in and 2nd is
FM (Final Modification) Stage.

1. RE Stage (Also known as August Review): Railway Administrations review their

expenditure in August to see whether any modifications are necessary in the allotments
placed at their disposal. The review in respect of each grant is submitted, to the Railway
Board so as to reach them not later than 1st September each year.
At RE Stage, administration can envisage any new expenditure which was definitely not
anticipated in the budget and which cannot be postponed. Review should disclose the
necessity of additional grants or the possibilities of net savings, in order to enable the Board
to set off savings on one railway against excesses on another and to arrive at one estimate of
the net additional grant required, if any.
2. FM Stage: By 21st February each year, Zonal Railway furnishes, for each grant separately,
with the statements showing the additional allotments required (both voted and charged)
or surrenders to be made, during the current financial year under each head of
appropriation, as prescribed in the budget orders, and requiring the sanction of the
President.
The variations between the final modified allotments required and the RE (revised
estimates) as fixed by the Board should in all cases be supported by adequate explanations
of the reasons for the demand or surrender.

Implication of merger of Railway Budget with General Budget

1. Capital at Charge is abolished. Thus now there is no liability on part of Railways to pay
dividend to Government of India; which used to be prescribed earlier by Railway
Convention Committee.
2. Railway will arrange its finances itself for all Revenue Expenditure (R&M, Operations, and
Staff).
 3. Railway will continue to get Capital Support (Gross Budgetary Support) from Union
Government. But it will be used for CAPEX only.
4. Railway PSUs will be administratively controlled by Ministry of Railways (MoR) but their
financial control will be with Ministry of Finance. Thus dividend on profit of these PSUs will
be shared with MoF instead of MoR.

DISCUSS THE SYSTEM OF COMPILATION AND REVIEW OF APPROPRIATION ACCOUNTS IN

THE RAILWAYS. WHAT IS THE ROLE OF THE PUBLIC ACCOUNTS COMMITTEE IN
REVIEWING THE APPROPRIATION ACCOUNTS?

WHAT ARE THE OBJECTIVES OF PREPARING APPROPRIATION ACCOUNTS? WHAT

INFORMATION IS GIVEN THEREIN? WHAT POINTS ARE TO BE OBSERVED IN EXPLAINING
VARIATION BETWEEN GRANT AND THE EXPENDITRE?

WHAT DO YOU UNERSTAND BY APPROPRIATION ACCOUNT? HOW IS IT DIFFERENT

FROM APPROPRIATION BILL? HOW IS IT PREPARED? HOW WILL YOU EXPLAIN REASON
FOR VARIATIONS BETWEEN “GRANTS” AND “EXPENDITURE”?

Appropriation Bill: (Para-375 to 381 of IRFC Vol-I) Pursuant to Article 114 of Constitution, after
the Demand for Grants (DfG) have been voted by the Lok Sabha, there shall be introduced a Money
Bill to provide for the Appropriation out of the Consolidated Fund of India (CFI) of all moneys
required to meet the grants so made by the Lok Sabha (i.e DfG, which is voted expenditure) and the
expenditure, If any, charged (charged expenditure) on the Consolidated Fund of India, but not
exceeding in any case the amount shown in the Statement previously laid before the Parliament.

The Appropriation Bill as passed by the Parliament and assented to by the President forms the
basis for budgetary allocation to the Railways.

Thus, Appropriation Bill (Article 114) is a money bill that allows the government to withdraw funds
from the Consolidated Fund of India to meet its expenses (both voted and charged expenditure)
during the course of a financial year.

Appropriation Account: (Para-402 to 415 of IRFC Vol-I) It consists of the statements which are
prepared for presentation to the Public Accounts Committee (PAC), comparing the amount of
actual expenditure with the amount of Grants voted by Parliament (Voted Expenditure) and,
Appropriations (including Charged Expenditure) sanctioned by the President.

The Appropriation Accounts are signed both by the CRB & CEO, as Principal Secretary to the
Government of India, Ministry of Railways, and by the Member (Finance), as Secretary to the
Government of India, Ministry of Railways, in financial matters and transmitted to the Director of
Railway Audit who has been entrusted by the Comptroller and Auditor General of India with the duty
of reporting on these accounts.

Explanations of Variations in Appropriation Accounts:

1. Under the sub-heads of the Appropriation Account of each Grant, explanations should be
furnished for the variation between the Original Grant or Appropriation and the also
between the final Grant or Appropriation and the actual expenditure of the year.
 2. If the aforesaid variations are not more than 5 per cent of the Grant or Appropriation, or in
the case of works Grant No. 16-Assets-Acquisition, Construction and Replacements, 10
percent, no explanation is necessary.
3. Whenever any variation of a large magnitude between the final Grant or Appropriation and
the actual expenditure is explained under any subhead of a Grant as due to adjustments of
wrong debits or bad accounting, the reasons for such wrong adjustments and why they could
not be rectified before the close of the accounts for the year, should invariably be furnished
in the form of foot-notes to the Appropriation Account concerned.

HOW IS THE RECONCILIATION OF “CHEQUES AND BILLS” AND “REMITTANCES INTO

BANKS” CARRIED OUT? SUGGEST WAY OF LEVERAGING TECHNOLOGY TO MAKE THE
SYSTEM MORE EFFECTIVE AND ON REAL TIME BASIS?

“Cheques and Bills” and “Remittances into Banks (RIB)” are Suspense Heads operated in Indian
Railways.

The Suspense Heads are certain intermediary/adjusting heads of accounts operated in Government
Accounts to reflect transactions of receipts and payments which cannot be booked to Final Head of
accounts due to lack of information as to their nature or for other reasons.

• These heads of accounts are finally cleared, when the amount under them is booked to their
respective final heads of accounts, by ‘Minus Debit’ or ‘Minus Credit’ suspense heads.
• If these amounts remain un-cleared, the balance under the ‘Suspense Heads’ would go on
accumulating and would not reflect Receipts and Expenditure of Indian Railways (IR)
accurately.
• Large outstanding amounts under different ‘Suspense Heads’ reflect that the accounting
authorities are not taking necessary action as required to be taken under the rules.
• Indian Railways Code for Accounts Department stipulates that the balances under each of
the Suspense Head should be proved and reconciliation at the end of the financial year
should be complete in all respects.

Miscellaneous Advance, MA (Debit Head): This represents the Assets of Railways. Thus increase in
Assets reflects increase in Debit amount. Therefore MA is shown in Debit Head of Account.
1. Establishment related (e.g. advance of pay on transfer)
2. Loans and Advances
Deposits (Credit Head): This represents liability of Railways. Thus increase in Liability reflects
increase in Credit amount. Therefore Deposits are shown in Credit Head of Account.
1. Un-Paid Wages
2. Deposit Private Companies (e.g. Krishnapatnam Port earnings are apportioned to the
private company after collected by Indian Railways.)
3. Deposit Miscellaneous: Cash security deposits, EMD, Deposit held on account of Court
cases, unpaid bills to contractor, deposit PF and Pension

Remittance Into Banks (RIB) (Debit Head) Cheques and Bills (C&B) (Credit Head)
Assets i.e. Reserve Bank Deposit (Railways) is Assets i.e. Reserve Bank Deposit (Railways) is
increasing due to these payments. reducing due to these payments.
1. RIB is a suspense head operated to record 1. C&B is a suspense head operated to record
 the remittance of earnings into Banks.
2. This Suspense head is debited with amount
of all Remittance Notes by Crediting the
Appropriate Revenue Service head (e.g.
Abstract “X”, “Y”, and “Z”).
3. Each Bank with which the Railways has
transactions sends daily statement (Known
as Credit Scrolls) showing the amounts
deposited by the various departmental
officers on behalf of Railways.
4. Thereafter banks transfer this amount in
Reserve Bank-Central Account Section,
Nagpur.
5. Finally these earnings are credited to
Reserve Bank Deposits (Railways). RBI send
details of amount deposited to railways for
reconciliation.
6. Reconciliation between Credit Scrolls of
Bank and Credit statement of RBI should be
closely monitored as belated transfer of
amount by Bank entails levying of penalty by
FA & CAO (Traffic).
First Entry:
RIB A/c Dr.
To CRN (Cash Remittance Note) Cr.
Second Entry:
Reserve Bank Deposits A/c Dr.
To RIB A/c Cr.
Resultant Entry:
Reserve Bank Deposits Dr.
To CRN (Cash Remittance Note) Cr.
the expenditure authorized to Bank for
payment to vendor and thereafter
reimbursement from RBI.
2. When Cheques are issued the head ‘Cheques
and Bills’ is credited with the amount of
cheques issued and the appropriate Revenue
service head (Final Head) is debited (i.e.
Demand No: 1 to 16).
3. Each Bank with which the Railways have
transactions sends daily statement (Known
as Debit Scrolls) showing the amounts paid
to various vendors/ parties on behalf of
Railways.
4. At the end of the month when the total
amount of Cheques is paid (i.e. cashed at the
Banks) are available from the Reserve Bank
and reconciled (between Debit Scroll and
Debit Statement of RBI), the head ‘Cheques
and Bills’ is debited and ‘Reserve Bank
Deposit (Rlys)’ is Credited.
5. The balances under this suspense head
represent total value of un-cashed cheques.
6. The balances under this Suspense Head
should always be a ‘Credit Balance’.
Cheques and Bills Cr. (at the time of entry in our
books)
After Reconciliation (at Railways)
Cheques and Bills Dr.
To Reserve Bank Deposits Cr.
Test of Remunerativeness -The net financial gain expected to accrue from a project may be
either by way of savings in expenditure or increase in the net earnings (i.e., gross earnings less
working expenses), or a combination of both. Except in the case of residential buildings, assisted
sidings and rolling stock to which special rules are applicable, no proposal for fresh investment
will be considered as financially justified unless it can be shown that the net gain expected to
be realised as a result of the proposed outlay would after meeting the working expenses or the
average annual cost of service, yield a return of not less than 10 per cent under DCF method or
7.5 per cent under the conventional method on the initial estimated cost.

Standards / canons of financial propriety

Every Officer should also enforce financial order and strict economy at every step and see that
all relevant financial rules and regulations are observed, by his own office and by subordinate
disbursing officers
1. The expenditure should not prima facie be more than the occasion demands.
2. That every Government servant should exercise' the same vigilance in respect of expenditure
incurred from public moneys as a person of ordinary prudence would exercise in respect of the
expenditure of his own money.
3.No authority should exercise its powers of sanctioning expenditure to pass an order which will
be directly or indirectly to its own advantage; for which he or his relatives have a stake.
4.Public moneys should not be utilized for the benefit of a particular person or section of the
community unless-
a. the amount of expenditure involved is insignificant; or
b. a claim for the amount could be enforced in a court of law; or
c. the expenditure is in pursuance of a recognized policy or custom.
5. The amount of allowances, such as travelling allowances, granted to meet expenditure of a
particular type, should be so regulated that the allowances are not on the whole sources of
profit to the recipients.

Proportionate Budget allotment: - For the purpose of carrying out a meaningful comparison of
the actual working expenses for the month with the budget allotment, it is necessary to
distribute the sanctioned allotment for the year over the twelve months after taking all known
factors of disturbance or special features into account. While the responsibility for the control
of expenditure against the budget allotment devolves upon the authority at whose disposal the
allotment has been placed, it is the duty of the Accounts Officer, in his capacity as the financial
adviser to the Administration, to render all possible assistance to the controlling authorities in
the exercise of such control.
Accordingly, he works out, at the beginning of each financial year, in consultation
with the officers responsible for the control of expenditure, the estimated progressive
expenditure under each sub head of a grant keeping in view the following factors: (i) Throw
forward from the previous year. (ii) All expenditure whether in cash or by transfer, the liability
for which already exists, but which is not likely to be distributed evenly during the year, whether
because it is of a periodical nature, or because it is contingent on the receipt of supplies, or for
any other reason. (iii) Expenditure which is practically fixed and evenly distributed throughout
the year. (iv) Other expenditure which is likely to be incurred during the year but liabilities for
which have yet to be incurred. (v) The need to keep some amount as a reserve for meeting fresh
or unanticipated expenditure.
From the details thus worked out, the "Proportionate Budget Allotment" for each month is
worked out for each sub-head of the Grant, and the progress of expenditure under each sub-
head is then watched from month to month through Monthly Financial Reviews in order to see
that the expenditure is according to anticipations and not at a pace which is likely to lead to an
excess at the end of the year.

Exchequer Control.- Exchequer Control is an important tool for budgetary control, and
functions as a mechanism for concurrent of cash outgo by each disbursing officer against the
cash content of the budget allotment. The regulation of cash disbursements will be made by
disbursing officer separately under each grant and executive officers should assist the
disbursing officer in framing the data .
Implementation of Exchequer Control.- Implementation of Exchequer Control involves the
following steps
(i) Correct assessment of the `cash’ and `adjustment’ portions of the sanctioned annual budget
under each demand by cash disbursing officer;
(ii) As accurate an assessment as possible of the quarterly requirement of cash.
(iii) Issue of quarterly/monthly cash authorization to disbursing officer, and
(iv) Concurrent control of cash outgo by each disbursing officer
Information to be furnished by Executive Officers.-
1.Executive officers, should assist the disbursing officer in making a correct assessment of
`cash’ and `adjustment’ portions of the sanctioned annual budget under each Demand,
keeping the guidelines indicated in para 546-F in view.
2. They should also make an assessment of quarterly forecast of expenditure under the
categories ‘cash’ and ‘adjustment’ and finish the data to the disbursing officer for exercising
control of cash outgo.
Limitation of Exchequer Control.-Exchequer Control is a self imposed expenditure discipline
i.e. by means of a system of day to day monitoring. to ensure that the cash contents of the
budgetary allocation is not exceeded.
Suspense Accounts Operated by Railways
Under Revenue Receipts: i. Traffic Account, and ii. Demands Recoverable.
Under Revenue Expenditure: i. Demands Payable, and ii. Miscellaneous Advance Revenue
Under Capital Expenditure: i. Purchase Suspense ii. Stores Suspense iii. Workshops
Manufacture Suspense iv. Miscellaneous Advances Capital

For Adjustment of Remittance Transactions: i. Reserve Bank Suspense, ii. Remittances into
Bank

Account Current
• Account current is a statement of receipts & disbursements of an accounting circle
classified under prescribed heads
• Prepared from General books after the general books for a month are closed and the
ledger has been written up
• Conforms to Govt. accounting by recording on actual basis, while schedules (which
indicate the details of receipts and disbursements, also accrued earnings {Traffic suspense} &
un-discharged liabilities {DP, Labour}) conform to the Comml. Accounting
• All entries are shown net in units of Rs.; for the month and to end of the month
• Prepared separately for Revenue and Capital transactions
Account Current –Pre-requisites
• To facilitate collecting/booking of expenditure pertaining to the accounting circle and
transferring out the expenditure (called adjustments) that does not pertain to the circle,
exchange of inter-divisional / inter-railway transactions shall take place by prescribed dates.
• All adjustments shall be carried out and no transaction is left unattended.
• No amount of transfer Rlys/ transfer Divl should be adjusted to Suspense heads.
• Transactions upto the previous month are reviewed and corrections if any are carried
out in the on hand accounts.
• Based on Pink advice received from CAS/NGP, the amounts need to be adjusted in RIB
and C&B.