Chapter – 4
ACCOUNTING
4.1
Accounting
4.1.1 It is a Process of Recording, Classifying, Summarizing, Analyzing and
interpreting the financial transactions and communicating the results thereof to
the persons interested in such information viz. Districts, State, SPD, Ministry
of HRD etc. Communication of these financial statements enables the higher
authorities (Management) to take required decisions;
4.1.2 Complete accounts in respect of financial transactions of the SIS i.e. in the
Head Office as well as DPO/Block level/Cluster and SMC/School Level need
to be maintained in the same manner as required in the State Govt. Office.
4.1.3 Double Entry Method based on ACCRUAL BASED/MERCANTILE
SYSTEM of accounting shall be followed under SSA.
4.1.4 Books of accounts/other documents required to be maintained under SSA, at
all levels of expenditure including other village organizations:
(A)
Registers
(a)
Cash Book
(b)
Ledger
(c)
Journal
(d)
Cheque issue register
(e)
Register of Advances
(f)
Temporary Advance Register
(i)
staff
(ii)
contractors/suppliers
(iii) TA/DA advance
(g)
Stock Register
(i) Capital Goods
(ii) Non-consumable articles
(iii) Consumable articles
(h)
Register for Journal / Magazines / News Papers
(i)
Register of Bank drafts received
(j)
Register of remittances made into the Bank
(k)
Register of bank drafts dispatched
(l)
Bill Register
(m)
Establishment Register
(n)
Register of works
(o)
Register of grants of advances to mobilizing agencies/ NGOs/
Voluntary Agencies
(p)
Fixed Assets Register
(q)
Despatch Register
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(r)
(s)
(B)
File Register
Consolidated Register indicating the progressive expenditure
from month to month in respect of each District;
Other Documents
(a)
Bank Pass Book/Bank statement
(b)
Monthly accounts of Receipts and Payments
4.1.5 These records and receipts/invoices shall be available for inspection by the
auditors, SIS, State Govt. and Govt. of India;
4.1.6 At the end of each quarter a consolidated account showing total receipts and
payments made during the quarter under each heads of account with opening
and closing balances be prepared and submitted to the concerned Deptt. of
State Govt. and the Govt. of India;
4.1.7 Consolidated records of receipts and expenditure shall be kept at District and
State Levels;
(a)
A fixed Assets Register shall be maintained at School, CRC, BRC,
DPO and SPO levels, as per the format given in FM&P Manual.
Separate Fixed Register be maintained for Capital Goods, Consumable
and Non-Consumable articles;
(b)
Physical verification of these articles be arranged at least once a year;
(c)
The relevant abstract of Register of Assets be appended to the annual
statement of accounts submitted by Society to the Govt. of India
showing progressive figure both stores and value.
4.1.8 No expenditure be incurred by the Society which is repugnant to the objectives
of the Programme and the expenditure incurred is in accordance with the
prescribed procedures and the canons of the Financial Propriety i.e.
(a)
(b)
(c)
(d)
Every Government servant is expected to exercise the same vigilance
in respect of expenditure incurred from public money as a person of
ordinary prudence would exercise in respect of expenditure of his own
money;
The expenditure should not prima facie be more than the occasion
demands; No authority should exercise its powers of sanctioning
expenditure which will be directly or indirectly to its own advantage;
Public money should not be utilized for the benefit of a particular
person or section of people;
The expenditure so incurred does not result into a source of profit for
the recipients;
4.1.9 Accounts Wing of the State Society needs to ensure strict observance of
accounting principles;
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4.1.10 Every State Society needs to ensure / establish the operation of adequate and
satisfactory internal audit functions;
4.1.11 Any grant or a portion thereof given by the Govt. of India/State Govt. to
Society for a specific purpose shall not be appropriated without the previous
sanction of the granting authority to a purpose other than that for which it was
originally approved;
4.1.12 Grant released by Govt. or India/receipts from other sources including State
Govt.’s share of grant would be deposited in a JOINT SIGNATORY Savings
Bank account in any nationalized or scheduled bank;
4.1.13 EC of the State Society would be empowered to open JOINT SIGNATORY
savings bank accounts, authorize a DDO to operate the accounts and delegate
financial functions to State, District, Block, Village and School levels.
4.1.14 ONLY one savings bank account should be opened for EACH major
component of SSA viz. SSA and KGBV at SPO, DPO, Block and Cluster
Level.
4.1.15 At School level, there can be one savings bank account for SSA and KGBV.
4.1.16 In exceptional cases, more than one savings bank account can be opened at
any level, only after the approval of EC of SIS.
4.1.17 At the village level, the joint Signatory Savings account can also be opened in
Post Offices;
4.2
Advances
4.2.1 Funds released to the State, districts and sub-district (SMC, BRC and CRC)
levels on quarterly/ half yearly/yearly/one time basis for undertaking
programme activities such as civil works/Teaching Learning Equipment
(TLE), repairs and maintenance, teachers’ salary and teachers` grants etc. are
initially classified as Advances.
4.2.2 Subsequently on receipt of the Expenditure Statements/Utilization Certificates
from the State Implementation Society of having spent the funds these
advances are adjusted. However, the advances, if not actually spent, would
continue to be shown as such.
4.3
Norms for regulating advances
The advances, as far as possible be adjusted in the quickest possible time
and in an efficient manner. Failure to adjust the advances impacts the
release of funds to the States / UTs in the subsequent financial year,
besides raising audit paras.
(a)
The following are the norms for regulating the advances:-
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(i)
S.No
Nature of
Advance
Periodicity
Authority to
incur
expenditure
School
Management
Committee
School
Management
Committee
Teachers
Basis of
Adjustment
1.
TLE
One time
2.
School Grant
Annual
3.
Teachers`
Grant
Annual
4.
Repair
and
Maintenance
of
school
building
Civil Works
by
community
Annual
School
Management
Committee
Utilization
Certificates
Two
installments
SMC
Salary
of
locally
appointed
Teachers
Teacher’s
Training
Quarterly
SMC
Supervising
Engineer’s
Certificate
(for
second
installment
and
final
payment) and
Expenditure
Statement
Expenditure
Statement
Two
installments
BRC/CRC
Expenditure
Statement
Annual
Grants
to
BRC/ CRC
Annual
BRC/CRC
Expenditure
Statement
5.
6.
7.
8.
(ii)
S.
No
1.
4.4
Sub-district level
Expenditure
Statement
Utilization
Certificates
Utilization
Certificates
Time limit for
submission
Within one month
of the close of the
financial year.
Within one month
of the close of the
financial year.
Within one month
of the close of the
financial year.
Within one month
of the close of the
financial year.
Within 3 months of
the completion of
the work.
Within one month
of the close of each
quarter.
Within one month
of the completion
of the training.
Within one month
of the close of the
financial year.
State and District level
Nature of
Advance
Teacher’s
salary
Periodicity
Quarterly
Authority to
incur
expenditure
SPO & DPO
Basis of
Adjustment
Expenditure
Statement
Time limit for
submission
Within one month
after the close of
each quarter.
Adjustment/monitoring of advances:
(i)
The advances released to SMCs for meeting non-recurrent expenses
and which remain unspent at the end of the year shall be carried over to
next year as spillover activities subject to approval of PAB in its
subsequent meeting;
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(ii)
(iii)
(iv)
(v)
(vi)
(vii)
4.5
Advances paid to contractors/suppliers in terms of the agreement for
works/ supplies shall be treated as expenditure subject to submission of
detailed accounts indicating the work done/supplies made.
Advances paid to Government Department cannot be treated as
expenditure unless the expenditure Statement is received.
The advances shall be treated as expenditure for reporting and their
utilization certificates will be kept at levels prescribed by the Financial
Regulations of the State Implementing Society as laid down in Annex
X of the Manual on Financial Management and Procurement.
All advances are to be entered in the Advance Register as per specimen
given Annex VI of the Manual on Financial Management and
Procurement. The adjustment of the advances is also to be entered
promptly in the advance register.
Personal Advances must be settled WITHIN ONE MONTH failing
which penal action along with charging of interest be taken;
The next higher authority above the authority who released the
advances will strictly monitor the progress of adjustment of advances
and take remedial measures required for the speedy adjustment of
advances within the time limit prescribed above.
Advances Paid, not spent/settled, time line for expending and their
implications
S.
No.
1.
Advance paid
for activity
TLE
To be utilized for
2.
School Grants
For replacement of nonfunctional
school
equipment/other recurring
costs like consumables
3.
Teachers`
Training
4.
Research,
Evaluation,
Supervision
and
Monitoring
For Providing training to
Teachers at BRC/CRC
level,
newly
recruited
teachers etc.
For
developing
and
regularly
implementing,
monitoring
systems
to
measure quality related
outcomes etc.
As per local specific context
and requirement/need to be
determined
by
teacher/School Committee
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Time line
specified
Within
the
timeframe
if
specifically
prescribed
or
else before the
end
of
the
financial year
-do-
Implication if not
settled/spent
Can be carried forward as
spill over, subject to
approval of PAB in its
subsequent meeting;
-do-
If not utilized / partly
utilized,
- balance to be returned to
the State and unutilized
amount lapses.
- conveys inefficiency on
the part of concerned
deptt.
- Also conveys inflated
budgeting
by
the
State/District
-do-
-do-
-do-
4.6
Account Head
4.6.1 The Account head and account code need to be similar to the budget head and
budget code. This should correspond to the interventions and the norm number
prescribed under SSA framework as attached at Annex VII of FMP Manual.
4.7
Cash Book and its error Correction
4.7.1 Proforma of Two Columnar Cash Book
Date
Left Side
Right Side
Receipts (Rs.)
Particulars V.No. Cash
/L.F.
Payments (Rs)
Particulars V.No. Cash
/L.F.
Bank
Date
Bank
(i)
Cash book is the principal record of all financial transactions taking
place every day;
(ii)
It need to be maintained under double entry system, except at Cluster
and School level where it can be maintained under Single Entry
system;
(iii)
It need to be a two column cash book wherein one column be used for
CASH and the other for BANK. It has two sides – one for Receipts
and the other for Payments;
(iv)
One the left hand side in the Cash column, all kinds of cash receipts, of
whatever nature need to be entered. Voucher number to be indicated
in the chronological serial order. Similarly, if the receipts pertain to
bank viz. Cheque, Draft or Bank transfer, it need to be entered in the
Bank column while maintaining the serial order along with cash book.
LF stands for Ledger Folio (page number of ledger) wherein posting is
done on daily basis.
(v)
Separate cash book need to be maintained at State/District/Block level
for each financial year and separately for SSA, KGBV
(vi)
Each entry should be briefly descriptive and attested by the Head of
Office/DDO. There should no over writing. Cuttings should be
rewritten and signed;
(vii)
Account payee cheques only should be issued, issuance of bearer
cheques avoided and cheque number invariably noted in cash book;
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4.8
(viii)
Cash book be closed daily and balance in hand written. Cash need to
be verified by Head of Office/DDO at least once a month and
certificate, as indicated in FM&P Manual, recorded in the cash book;
(ix)
If the error in cash balance is located on the same day, the same should
be corrected. However, if it is found subsequently, it should be
corrected through a separate journal entry, with the due approval of
HOD/DDO.
(x)
In case accounts are computerized, manual cash book need not be
maintained. Rather a print thereof be kept in bound form, duly signed
by HOD/DDO;
Journal (also called Day Book)
4.8.1 Proforma of Journal:
V. No. /
Date
4.9
Particulars
L.F.
Debit (Rs)
Credit (Rs)
(i)
Cash and Bank transactions are invariably entered in the Cash Book.
Therefore, the remaining transactions like Adjustment Entries, Entries
pertaining to Opening and Closing balances, error correction etc. are
passed through the Journal. The Journal vouchers should also carry the
serial number in chronological order;
(ii)
Brief narration of each entry shall be given in the voucher. It shall be
signed by HOD also. It should be supported by the documentary
evidence in the form of a voucher.
Ledger
(i)
Ledger is a register having a number of pages which are numbered
consecutively. One account is assigned one page or more than one
page in the ledger, as per requirement;
(ii)
It has an index of various accounts opened in the ledger in the
beginning of the register. This helps in performing the task in an easy
and efficient manner.
(iii)
It has the following format printed on each page except the Index:
Name of Account
Date
Particulars
Page No.___
Folio/V.No.
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Debit
(Rs)
Credit
(Rs)
Balance
(Rs)
4.10
(iv)
In the ledger, entries are transferred from the Cash Book (both cash
and bank columns) and the Journal in the chronological order;
(v)
This process of transfer of information from Cash Book/Journal to the
Ledger is called posting;
(vi)
Posting should be done on daily basis to get the updated information
required for any purpose;
(vii)
At the end the balances of both debit and credit side are ascertained
and the difference between them is written in the last balance column;
(viii)
If the total of debit column is more than the credit, it is called a Debit
Balance and if Total of Credit column is more than Debit, it is called
Credit Balance. This is called Balancing the Accounts.
(ix)
The debit or credit balance of each and every account in the ledger is
written in a separate statement in the respect debit or credit column.
Balance of Cash or the bank is also written in this statement. It is
generally a debit balance since in SSA because no loans or overdrafts
are sought by the society from any source;
(x)
Keeping in view the basic accounting equation of double Entry system
i.e. Assets = Liabilities, the total of Debit side of the statement must
match with the total of Credit side. This Statement, so prepared, is
called the Trial Balance;
(xi)
If the Trial Balance matches, it reflects the arithmetical accuracy of the
accounting work done by the staff;
(xii)
Trial Balance sets the stage for preparation of final accounts, viz.
Income & Expenditure Account and the Balance Sheet as on any
particular date;
Final Accounts : These comprise of (i)
Receipt and Payment Account
(ii)
Income and Expenditure Account and Balance Sheet
(iii)
In addition, other documents, as detailed in the FM&P Manual are also
required to be prepared and submitted;
4.10.1 Receipt and Payment Account (As per Annexure XXIII of FMP Manual)
Receipt and payment account is a mere summary of cash receipts and
payments during the year;
(a)
It begins with the cash at bank and cash in hand at the commencement
and ends with that at the close of the year
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(b)
Receipts and payments shown in this account do not distinguish
between capital and revenue.
(c)
It also does not include an unpaid/outstanding expenditure or any
unrealized income relating to the period under review;
(d)
Receipts and Payments pertaining to any financial period and not
specific about the financial year in question are incorporated in this
account;
(e)
Generally, receipts are more than the expenditure;
4.10.2 Income and Expenditure Account (As per Annexure XXII of FMP
Manual)
(a)
It is generally adopted by non trading concerns like SSA.
(b)
This account is credited with all earnings/incomes (both realized and
unrealized) and debited with all expenses (both paid and unpaid).
(c)
If the Credits/Incomes are more than the expenses, it results into a
surplus during the period;
(d)
If Debits/Expenses are more than the Credits/Income, it results into a
deficit during the period
(e)
The surplus or deficiency is carried to the Balance sheet and adjusted
against Capital Fund;
(f)
There needs to be separate column each for revenue and capital
receipts and also for revenue and capital payments in the Income and
Expenditure Account. Thus, it begins with the separate opening
balances of revenue and capital nature and ends in the same manner;
(g)
All the items appearing in the Trial Balance are taken to any one
account viz. either income and expenditure or the Balance sheet;
(h)
After the income and expenditure account has been prepared, the left
over items in the Trial Balance are carried over to the Balance Sheet
and are written as per the proforma appearing in the FM&P Manual.
4.10.3 Balance Sheet
(a)
The total of Assets and Liabilities in the Balance Sheet must be equal
as we are following the Double Entry System of Accounting;
(b)
The Balance Sheet is to be prepared as per proforma XXI given in the
FM&P Manual.
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4.10.4 Comparison of Income and Expenditure Account and also the Balance
Sheet
4.11
4.12
(a)
Comparison of the Income and Expenditure Account, intervention wise
with the previous two years conveys the trend as to whether the
performance in financial terms is going up or down;
(b)
Comparison with the approved budgets will set the trend of the
improved or other-wise performance of the SIS of the State;
(c)
In the same manner, the balance sheet of current year, head wise can
be compared with the previous two years to monitor the trend of
increased improvement in performance or otherwise;
(d)
In between the year, this comparison helps the SPD to take remedial
steps for improving the performance, if found lagging behind. The
Finance Team can prepare a summarized variance about interventions
and put up the same to SPD;
(e)
Comparison should be done on regular basis to plug all kinds of pitfalls
which will surely display a glowing performance at the end of the
financial year;
Bank Reconciliation Statement
(a)
Bank Reconciliation Statement is a statement prepared mainly to
reconcile the difference between the bank balances shown by the Cash
Book and Bank Pass Book;
(b)
The main objective is to find out the causes of differences between two
balances and pass necessary correcting entries in the books of
accounts.
(c)
Bank Reconciliation Statement must be prepared on monthly basis;
(d)
Stale cheques need to cancelled and entry passed in the books of
accounts on regular basis;
Need Objectives and Importance of Bank Reconciliation Statement
(a)
To highlight the causes of difference;
(b)
To minimize the chances of fraud by cash staff;
(c)
Moral check on staff to keep the cash records always up to date;
(d)
Detection of errors and omissions;
(e)
Improvement in future plans based on current lapses detected;
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4.13
4.14
4.15
(f)
To ascertain the correct bank balances available for planning and use;
(g)
To meet the most sought need of the auditors;
Reasons for differences in the balances of Cash Book and Pass Book
(a)
Cheques issued but not presented for payment;
(b)
Cheques sent for collection but not yet collected or dishonored;
(c)
Bank charges and commission charged by bank;
(d)
Interest allowed by bank;
(e)
Errors
Capacity building of Accounts and Audit Staff
(a)
Orientation training on planning, budgeting, accounting, procurement,
internal audit etc. of SSA should be given to all Accounts and Audit
Staff at periodical intervals;
(b)
This training equips them with sufficient knowledge of the area of their
work for the smooth and efficient day to day functioning of the tasks
assigned to them;
(c)
Special focus be given during training on the issues raised by the
auditors of any kind viz. CA, IPAI, CAG, internal auditors etc. so that
the observations made by them are not repeated again in future;
(d)
This way, the annual accounts and annual report shall be neat and
clean from all angles and reduce work at all levels.
(e)
A minimum of 5 days training to accounts and audit staff is mandatory
in a year;
(f)
The accounts staff so trained at district level will train staff at block
level, who in turn will train the staff at cluster and School level;
Control of Expenditure
4.15.1 Persons authorized to incur expenditure must ensure that
(a)
Financial order and strict economy are enforced at every step;
(b)
See that all relevant financial rules, orders, directions and instructions
are observed;
(c)
That total expenditure is kept within the limits of the budget provision;
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(d)
The funds allotted / transferred are spent in the interest and service of
programme and upon the objects for which provisions have been made;
(e)
Items of expenditure are of obvious necessity and are at fair and
reasonable rates, sanction of the competent authority obtained etc.
(f)
Should keep themselves closely acquainted with the progress of
receipts / expenditure, commitments and liabilities incurred but not
paid;
ROLE OF FINANCE DEPARTMENT IN SSA
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
To have a clear understanding of uniform accounting policies, for preparation
of accounts of the Society, treatment of Expenditure, unspent amount, sound
accounting principles and FM&P Manual;
To keep and maintain proper records of books of accounts, preparation of
financial statements and get the same audited by Statutory Auditors;
Keep
expenditure,
intervention
wise,
which
would
help
Administrators/Managers to monitor SSA funds/progress, further investments,
decision making and correlation with results achieved;
Proper accounting and safeguard of assets/liabilities;
Prevent misuse, misappropriation and fraudulent use of SSA funds;
Mis-procurement cases to be monitored for proper correction;
SSA funds to be used only for SSA activities which have been approved by
PAB;
Follow up action on Statutory Auditors’ observations;
Prompt settlement of outstanding advances by regular monitoring of
UCs/Statement of Expenditure;
Have sound Internal Control and Internal Audit system;
Ensure that periodical statements with respect to finance, submission of audit
reports, annual reports are submitted to the concerned authorities well before
the target time.
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