Govt to gradually shift to accrual system of accounting: CGA
The govt has accepted in-principle to gradually move from cash based to accrual basis of accounting.
By PTI |
NEW DELHI: The government has accepted in-principle to gradually move from cash based to accrual basis of accounting, under which revenues and expenditure are shown in the books even when they are realised later, Controller General of Accounts said today.
"There are definite benefits of accrual accounting that cannot be ignored. The decision makers can know the full cost of services they are providing, and this would result in better resource allocation, better management of assets and liabilities," said Controller General of Accounts V N Kaila.
Cash-basis accounting is a method of bookkeeping that records financial events based on cash flows and cash position. Revenue is shown in the books when cash is received and expense is recognised when cash is paid.
On the other hand, under accrual accounting, revenue is shown in the balance sheet when it is earned and realised, regardless of when actual payment is received.
Overall, accrual-based accounting would create a desirable measure of the complete financial health of the government, he added.
Speaking about the issues involved in transitioning to the accrual system of accounting, Kaila said that there are various factors that have created a demand for a transition to accrual system of accounting, such as the changing information needs of the decision makers, the implications of the FRBM Act, outcome oriented budgeting, etc.
"There are definite benefits of accrual accounting that cannot be ignored. The decision makers can know the full cost of services they are providing, and this would result in better resource allocation, better management of assets and liabilities," said Controller General of Accounts V N Kaila.
Cash-basis accounting is a method of bookkeeping that records financial events based on cash flows and cash position. Revenue is shown in the books when cash is received and expense is recognised when cash is paid.
On the other hand, under accrual accounting, revenue is shown in the balance sheet when it is earned and realised, regardless of when actual payment is received.
Overall, accrual-based accounting would create a desirable measure of the complete financial health of the government, he added.
Speaking about the issues involved in transitioning to the accrual system of accounting, Kaila said that there are various factors that have created a demand for a transition to accrual system of accounting, such as the changing information needs of the decision makers, the implications of the FRBM Act, outcome oriented budgeting, etc.
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