Accounting is an executive function and is an essential part of the budgetary process. Accounting means keeping a systematic record of financial transactions. A good accounting system is indispensable for adequate budgetary control. It is only through systematic accounts supported by vouchers and receipts that the legality and honesty of the transactions as also the integrity of the officers handling the funds can be determined. Secondly it is through the accounts only that it can be ascertained whether the budgetary provisions as voted by the legislature have been properly implemented or not. It is through accounting only it can be seen as to how much has been spent and for what purpose it was spent and whether it was within the budgetary limits or not. Thirdly, the accounts furnish valuable information need regarding financial conditions and operations for policy determination and for making programmes. Through accounts, the authorities can know whether a particular activity or programme is self-supporting or involves a burden on the Public exchequer, and in case of the latter, whether it should be continued or expanded or not.
The form of Public or Governmental Accounts differs from that of business and commercial accounts, because the objectives of the two are different. Business and commercial accounts are so kept as to facilitate the preparation of balance sheet, showing profit and loss, assets and liabilities. On the other hand, the purpose of Governmental accounting is to furnish data to show whether the stipulations regarding budgetary provisions as voted by the legislature have been observed or not. Hence the essential features of Public accounting are different from those of the private account. The following are the essential features of Public accounting:
- Centralisation of Accounts where one officer is generally made responsible for keeping the accounts of all the agencies of the Government. The centralisation gives a co-ordinated and unified picture of all the expenditure and income of the Government.
- ‘Double-entry book-keeping’ is the basis of maintaining the Government accounts. This means that every item of expenditure is entered at two places. One entry remains with the operating service, while another is sent to the Accounts Officer if there is a separate department of the Government, or to the Controlling Officer of the same service. In India, the accounts are maintained at two different places i. e. in the department by the IFO, and in the Treasury by the Accounts Officer of the treasury. These accounts are sent to the Ministry for reconciriation at frequent intervals.
- The accounting is done after classification of expenditure fund-wise. Assets, liabilities and proprietorship of every fund or group of funds should stand out as a separate balanced group of accounts. A complete balance sheet should be compiled for every fund.
- In the accounts, all the items of a non-revenue character should be excluded from revenue accounts. All the revenues should be classified fund-wise and service-wise.
- The Government accounts should follows the budgetary form i. e. they should be kept under the same heads and sub-heads as those of the budget.
Accounting in India
Generally speaking, accounting is an executive function and is therefore usually vested in the executive, departments of the Government. But in India, accounting has not been made the responsibility of the executive. It is vested in a separate department known as the Accounts and Audit Department headed by the Comptroller and Auditor General of India (C&AG), whose office is a creation of the Constitution. The C&AG, there is in each State an Accountant-General in whose office the accounts of the transactions (of the Union as well as State concerned) taking place within the territorial limits of that State are maintained. It is worth noting that the A. G. ’s office (Accountant General) does not maintain the accounts of the Railway and Defence departments. These are maintained by the Financial Commissioner for Railways and the Military Accountant- General respectively. The various stages in accounting in India are as follows:
- The initial entry relating to the expenditure incurred by the department is kept by the Treasury Officer, who is in-charge of the Government Treasury* (*The Government Treasury is maintained at the cost of the State Government, but it keeps the accounts of the Central as well as State Governments) and the departmental officer designated to perform the accounting function. The Treasury Officer sends a list of payments made during these intervals, supported by vouchers to the A. G.
- The classification of the accounts is then done by the A. G. according to the head of the account. There are four different accounts, i. e. revenue accounts, capital accounts, debt accounts and remittances. Each of these accounts is further subdivided into major heads, minor heads which are in turn further divided into detailed heads.
- The next stage in accounting is compilation of accounts. However, before compilation, the accounts are audited by the auditor. The compilation of the accounts is done every month in the department, once in 3 months by the’ Finance Ministry and on yearly basis by the CAG.
- Lastly comes the annual compilation of all the accounts by the Auditor-General of India. He submits the Finance Accounts, Appropriation Accounts and his Audit Reports to the President (or the Governor, as the case may be).