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Title: Session Title

1
Session 2

Session Title
History of Government Accounting, Introduction,
Formation of GASAB, Composition of GASAB,
Essentiality of formulating Accounting and
Financial Reporting Standards, Scope and
Objectives of GASAB, Responsibilities of GASAB,
Authority, Scope and Applicability of IGASs ,
Standard-setting Procedure for IGASs, Compliance
with IGASs

2
Session overview

With the support of the Government of India, the
Government Accounting Standards Advisory Board
(GASAB) was constituted by the Comptroller
Auditor General of India on August 12, 2002 for
the Union and States under Article 150 of the
Constitution of India.
The main objective of setting of GASAB is to
establish and improve standards of Government
accounting and financial reporting in order to
enhance transparency and financial
accountability. It also formulate and propose
standards that improves the usefulness of
financial reports based on the needs of the
users. It also cover significant areas of
accounting and financial reporting that can be
improved through the standard setting process
and to improve the common understanding of the
nature and purpose of information contained in
the financial reports.

3
Session Structure

1.Existing system followed in Government
Accounting .
2. Why GASAB?
3.Formation of GASAB its composition.
4. Essentiality of formulating Accounting and
Financial Reporting Standards
5. Scope and Objective of GASAB
6. Financial Statements of the Government
7. Authority, Scope and Applicability of IGASs
8. Compliance with IGASs
9.Constitution of Apex Committee for
implementation and transition to accrual based
accounting systems in Government.
Exercise and Group discussion

4
DEVELOPMENT OF GOVERNMENT ACCOUNTING SYSTEM IN
INDIA

Under the Government of India Act,1858, India
came under the direct control of British
Parliament from 1st November , 1858. Imperial
Income Expenditure for sanction by the Supreme
Government of India was introduced from 1861-62
by way of Annual Budget, which formed the base of
Imperial Account and laid the foundation of
Imperial Audit.
The A.G. to Government of India was designated
as Auditor General of India (1860).
In 1862, Financial Secretary became head of the
Financial Department which included the
Department of Accounts Audit. The Auditor
General of India was re-designated as Auditor and
Accountant General of India. He was charged with
the duty of bringing the accounts of the Indian
Empire together and responsible to the Government
of India for correct performance of the
mechanical duties of accounts and audit as
distinguished from administrative matters coming
within the Province of the Finance Secretary.
From April, 1866, a uniform financial year was
adopted beginning from 1st April and ending on
31st March. Use of Arabic numerals for accounts
maintenance were enforced..

A system of monthly consolidation of audited
accounts was brought into force in place of
annual consolidation as in the past by resolution
dated 20th April 1865 and dated 6th October,
1865.
The designation of the Auditor and Accountant
General to the Government of India was changed to
the Comptroller General of Accounts (July, 1881)
and he was made responsible for consolidating the
Budget and regular estimates which was reviewed
by the Financial Department.
The Comptroller General of Accounts was further
redesignated as Comptroller and Auditor General
in India by a resolution dated 6th May, 1884. He
was entrusted with the responsibility of
supervising the accounting system as well as
conducting an Appropriation Audit.
Under Government of India Act, 1919 the
designation CAG in India was changed into
Auditor General in India and he was responsible
for audit of all accounts in India.
Government of India Act, 1935 changed this
designation to Auditor General of India and
general superintendence of Audit of Indian Home
Accounts was now vested in him. This designation
was again changed to the Comptroller Auditor
General of India under the Indian Constitution.

The duties and powers of the Comptroller and
Auditor General of India is vested in Article 148
to 151 of the Constitution of India. The CAG of
India is appointed by the President.
The CAG (Duties, Powers and Conditions of
Service) Act, 1971 framed under article 149
prescribes in detail the duties to be performed
and powers to be exercised by him in relation to
the Accounts of Union and of the States
(Appropriation Accounts, Finance Accounts and
Audit Reports) shall be laid before each House of
the Parliament/State Legislature.

7
Development in the evolution of accounts
structure and classification of Government
Account

1. Basis of Government Accounts
Budget is the basis of Accounts, which are
maintained on cash basis. Budget, referred to as
Annual Financial Statement in Article 112 (in
respect of Union Government) of the Constitution
of India, is a statement of estimated receipts
and expenditure of the Government for a financial
year.
Executive obtains legislative approval for
incurring expenditure to meet administrative
needs and securing socio-economic goals in the
best possible public interest and to gain
resources to meet such expenditure.

When moneys are actually received and expenditure
is incurred, all transactions are recorded in the
accounts of the Government. There has to be
one-to-one correspondence between the budget and
account figures.
the accounts show the actuals on the same pattern
as is adopted in preparing the budget estimates.
This pattern is called Structure of Budget and
Accounts.
Government Accounts are based, mainly, on Single
Entry System.

9
Commercial Accounts Government Accounts
Record transactions both where cash is received or paid and also where there is no movement of cash but transactions are on credit. Commercial accounts take cognizance of accrued liabilities (those involving payments on a future date) and accrued assets (those involving payments due but not accrued as yet). Barring a few exceptions, adjustments and correction of misclassifications, only cash transactions are recorded. The Government Accounts do not take cognizance of accrued liabilities or of accrued assets.
It show the financial position of the entity, in the balance sheet, on the closing date of balance sheet. The balance sheet lists all the assets and all the liabilities of the entity. The cost of physical assets is not carried forward from year-to-year.
Generally prepare the operating results or profit and loss account for the period of accounts. They list all the incomes that were due during the period of account, whether received or not, and all the expenditure incurred to earn that income, whether payments were made in cash during the period of account or deferred for the time being. There is no concept of profit or loss, and so the Government Accounts do not have any profit and loss account or operating results.
10

3-The three parts of accounts
Part-I Consolidated Fund of India/States (Under
Article 266(i) of the constitution.
Part-II Contingency Fund of India/States (Under
Article 267(i) of the constitution
Part-III Public Account of India/States (Under
Article 266(ii) of the constitution.
4- Revenue Expenditure and Capital Expenditure.
5-Voted Expenditure and Charged Expenditure
6- Plan Expenditure Non-Plan Expenditure

11
Purpose and importance of Accounting in Government

to collect, account for, collate, compile and
consolidate numerous financial transactions of
the government for a particular period and
present them in the prescribed form.
to ensure that all the transactions of the
Government have been accounted for and that no
transaction has been left out of the accounts
to present accounting and financial data in a
form that is a useful managerial tool and that
which can be used by the executive to control
public spending and canalize it into desired
directions
to provide the legislative bodies with data that
will enable them to determine how their mandate
to executive in raising new resources (through
taxation) and their mandate on incurring
expenditure out of the Consolidated Fund has been
followed

To fulfill the information needs of interested
agencies, both national agencies and
international agencies, about nature and extent
of government spending
To create a data bank over a period of time to
reflect on and to use the financial data
available in the accounts for socio-economic
development of the nation
To ensure accuracy of accounts and balances
where the Government acts only as a banker or as
a custodian of moneys that belong to some other
person or authority. This is particularly
relevant to transactions under Public Account and
those accounts, which do not close at the end of
the financial year to Government but close to
balance.

13
Principles of Government Accounting

To meet the requirements of Parliamentary control
over finances
to meet the requirements of executive control
over public finances.
to ensure maintenance of subsidiary accounts
to ensure maintenance of initial account
to ensure inclusiveness and totality of financial
transactions
Government Accounting, therefore, has to be on
cash basis
Government Accounting has to have a detailed
system of classification of receipts and payments
to ensure preparation of monthly and annual
accounts
To ensure generation of database of financial
data for inter-period comparison and for
generation of time-series data

Classification of Government Accounts
An elaborate system of classification of
expenditure (and receipts) is followed while
preparing the Government Accounts so that each
transaction of expenditure (and also receipt) and
each set of similar transactions can be linked to
or traced to a particular Division to a
particular Sub-Division to a particular
Sector, Sub-Sector Activity Project or
Scheme or Programme of the Government and to
a particular Object of Expenditure.
With a Five-tier classification of Government
Expenditure under sectors, major heads, minor
heads, sub-heads and detailed heads of account,
Government Accounting is more elaborate than that
followed in commercial accounts
The Annual Accounts
The Annual Accounts of the Government are
prepared for each financial year separately for
Union Government, for each State Government and
for each Union Territory having a Legislative
Assembly. The Civil Accounts of the Government
comprise the Finance Accounts and the
Appropriation Accounts.

15
Departmentalization of Union Government (Civil)
Accounts

It was effected during the financial year
1976-77.
The treasuries were relieved of all the functions
relating to receipts and payments on behalf of
the Central Government and in their place, public
sector banks were nominated for each
Ministry/Department to look after these
functions.
The Secretary to ministry/department was
designated as the Chief Accounting Authority and
the functions related to this designation are to
be discharged by the Integrated Financial Advisor
(IFA).
there is a Financial Advisor for every ministry
or department as the case may be. He is
responsible for keeping, compiling and rendering
accounts to the Controller General of Accounts on
behalf of the ministry or department.

Railway Accounts
The Indian Railways Finances were separated from
those of Central Civil Departments in 1924-25.
The cash balance of Railways has separated
proforma from Central Civil Balances from
01-04-1939.
PT Department
Commercial system of accounts was introduced in
the PT Department in 1925 by the introduction of
a Capital Account to exhibit the value of the
assets, creation of renewal reserve fund,
suspense account to reflect purchase and issue of
stores and manufacturing activity at the
workshops.
Proforma balance for the PT was created in
October, 1960.
This was bifurcated into Postal Balance and
Telecom Balance from April, 1968.
The telegraph accounts were separated from the
combined Posts and Telegraph Accounts in 1970-71
and chrishned Telecommunication Accounts Wing.
Defence Services
Independent proforma balances for the Defence
Services was created in April,1962.
With effect from 1st October 1951, Controller
General of Defence Accounts was created.

17
Why GASAB?

The following is the important essentialities
for formulating Government Accounting Standards
for our country
Improved public accountability for the efficient
and effective functioning of our democratic
system.
Fulfill the Governments duty to be accountable
to public and it contribute to a fuller
understanding of economic, political and social
consequences of allocation decisions and various
uses of Government resources both at the Centre
and at the State levels.
Accounting rules are designed to provide
standardized frameworks within which the
financial position of a Government can be
assessed.
Having a good accounting standards, no one can
manipulate or abuse to provide a misleading
picture of what is really happening in the
national economy.

a primary concern of GASAB is to ensure proper
identity to the existing concepts enshrined in
the current rules and filling up any lacuna in
our accounting system so that it improve the
quality attributes of our Government accounting
practices. Therefore, the primary purpose of the
standards that GASAB will act as quality
assurance yardsticks.
address the off-budget transactions
effectively.
disclose debt and other liabilities of entities
in the public sector fully and transparently.
address the nexus of accounts with financial
management
synthesize the cash based accounting system and
accrual based accounting system.
Government Accounting Standards Advisory Board
(GASAB) will cover both Union and States and
promote best practices on the basis of generally
accepted principles of Government Accounting and
steering a gradual course in reforming our
accounting system.

19
Government Accounting Standards Advisory Board
(GASAB)

1- Formation of GASAB
Article 150 of the Constitution of India
stipulates that The accounts of the Union and of
the States shall be kept in such form as the
President may, on the advice of the Comptroller
and Auditor General of India, prescribe.
Accordingly, with the support of the Government
of India, the Government Accounting Standards
Advisory Board (GASAB) was constituted on August
12, 2002 for the Union and States.

2- Composition of GASAB
Government Accounting Standards Advisory Board
(GASAB) for Union and States was constituted
under notification no. 678-716-AC-I/SP-II/79-2002
dated 12.08.2002. Accordingly, the Comptroller
Auditor General of India has constituted a
Government Accounting Standards Advisory Board
(GASAB) consisting of following officers
(i) Deputy Comptroller and Auditor General
(Accounts) as Chairperson
(ii) Controller General of Accounts, Ministry of
Finance, Government of India
(iii) Financial Commissioner, Railways, Ministry
of Railways, Government of India
(iv) Controller General of Defence Accounts,
Ministry of Defence, Government of India
(v) Additional Secretary (Budget), Ministry of
Finance, Government of India
(vi) Deputy Governor, Reserve Bank of India or
his/ her nominee.
(vii) Director General, National Council of
Applied Economic Research (NCAER), New Delhi
(viii) President, Institute of Chartered
Accountants of India (ICAI), or his/her nominee
(ix-xii) Principal Secretary (Finance)/ Secretary
(Finance) of four States by annual rotation and
(xiii) Director General / Principal Director
(Accounts), Office of the Comptroller and Auditor
General of India, as Member Secretary.

3- GASAB will, interalia, have the following
responsibilities
To formulate and propose standards that improve
the usefulness of financial reports based on the
needs of the financial report users.
To keep standards current and reflect changes in
the governmental environment.
To provide guidance on implementation of
standards.
To consider significant areas of accounting and
financial reporting that can be improved through
the standard setting process.
To improve common understanding of the nature
and purpose of information contained in the
financial reports.

4- Scope and Objective of GASAB
It will formulate Government Accounting
Standards (IGAS) for our country.
These accounting standards will be formulated in
conformity with the provisions of the
Constitution and our laws and in keeping with
international norms in this regard.
The basic objective of this initiative, taken at
the behest and with the approval of the Ministry
of Finance, Government of India, is to promote
best practices on the basis of generally accepted
principles of Government accounting.
GASAB has been entrusted with not only
formulating and proposing standards to improve
the usefulness of the Governments financial
reports based on the needs of the users but also
to keep these standards current so as to reflect
changes in the national and international
economic environment..
to provide guidance on the implementation of
standards and to consider significant areas of
accounting and financial reporting that can be
improved through the standard setting processes.

It will comprehensively address accounting and
financial management issues as they exist today
in the Indian context as well as prepare the
public sector for issues that the country is
likely to face in the future.
Government accounting frameworks have to be
devised in a manner that provides accurate and
useful signals to the market as distorted
financial information exacerbates a countrys
economic problems.
for performing and promoting a broad range of
value-added activities concerning financial
reporting and accounting in the Government. The
standards will establish the basis for the
measurement of performance.
GASAB is suggesting an operational framework and
roadmap of transition to accrual basis of
accounting in Governments.

5- Authority, Scope and Applicability of IGASs
The IGASs are notified by the Government as per
the powers vested under Article 150 of the
Constitution. The IGASs, as notified by the
Government, are applicable to the Union and the
States.
The provisions of the IGASs do not override the
provisions of any existing or future Acts or
Rules made there under by the Union or State
Governments.
The IGASs would be prospective in their
application. The IGASs are not applicable
retrospectively and the Governments are not
required to reframe their Financial Statements of
previous periods to comply with the IGASs.
IGASs by their very nature are meant to apply to
material items. Any other limitation on their
applicability or otherwise is made clear by GASAB
in the respective standards.
The IGASs have standard portions set in bold
italic type which should be read in the context
of explanatory paragraphs in the respective
Standards set in plain type. Both have equal
authority portion in bold, italic type
indicating main principles whereas those in plain
type explain those principles.

6-Standard-Setting Process
Objective
To lay down plan for development of Accounting
Standards.
To discuss Potential future projects.
To draw a time table for tracking the progress,
at regular intervals, of Accounting Standards.

Due Process
Identification of an issue
Issue Paper
Consultation Paper (CP)
Exposure Draft (ED)
Pronouncements

Time Table
Ist meeting to identify a technical issue by
members of the Board.
2nd meeting to review the Issue Paper/
Consultation Paper.
3rd meeting to consider the draft Exposure Draft
4th meeting to consider responses from
stakeholders and pronouncement of Standard.

Work Plan 2011-12
4 meetings in a year.
Finalization of Rules of Business.
Cash Basis IPSAS
Presentation of Budget Information (IGAS 6)
Presentation of Financial Statements (IGFRS 1)
Accounting Policies, changes in Accounting
estimates and errors (IGFRS 6)
Identification of future projects.

Suggested Technical Issues
IPSAS already issued.
Non-Financial Assets
Accrued Liabilities
Committed Expenditure
Utilization Certificate
Reporting Entity
Asset Accounting
Chief Accounting Authority
Management Responsibility and assertions.
Technical Advisors
TAs/ Nodal Officer Railways, Defence, Posts,
Telecom, ICAI, AP.

TBGs
ICAI IPSAS 1 (Presentation of Financial
Statements) and IPSAS 2 (Cash Flow Statements)
Railways Segment reporting IPSAS 18 (Segment
Reporting)
Defense IPSAS 1 (Presentation of Financial
Statements), IPSAS 12 (Inventories), IPSAS 24
(Presentation of Budget Information in Financial
Statements)
RBI Decline being non-government
Posts IPSAS 26 (Impairment Cash-Generating
assets), IPSAS 15 (Financial Instruments
Disclosure and Presentation) and IPSAS 19
(Provisions, Contingent Liabilities and
Contingent Assets)

31
Constitution of Apex Committee for implementation
and transition to Accrual Based Accounting System
in Government

Basis of forming Apex Committee
The Union Government has accepted the 12th
Finance Commission recommendation regarding
adoption of accrual accounting for the Union and
State Governments.
GASAB had formulated separate reports on the
Roadmap and transition path of accrual
accounting and Operational framework of accrual
basis of accounting in Government in India.
Subsequently, the GASAB had also issued (June
2011) Operational guidelines for accrual based
financial reporting in Government.
The various reports of GASAB, had recommended
constitution of a High Level Task Force/Apex Body
at Ministry of Finance for implementation of
accrual based accounting in Union and State
Governments.
The second Administrative Reforms Commission, in
its 14th Report relating to Strengthening
financial management systems in Government had
also recommended setting up of a Task Force and
an Expert Committee to examine various issues
indicated in the Report, including the costs and
benefits of introducing the accrual system of
accounting.

On consideration of recommendations of the
Reports, the .Ministry of Finance, Department of
Economic Affairs (Budget Division), New Delhi
vide Office Memorandum No. F.No.1(12)-B(AC)/2009
dated 13th September,2011 has constituted an Apex
Committee as the nodal agency for all matters
relating to the formulation of policy issues,
overseeing the implementation of and coordination
of transition to accrual based accounting system
in the Union and the State Governments.

Constitution of Apex Committee
Secretary, Ministry of Finance, Department of
Expenditure, Government of India (Chairman)
Dy. Comptroller Auditor General of India
Chairman (GASAB), Office of Comptroller Auditor
General of India.
Secretary (Finance), Ministry of Defence,
Government of India
Financial Commissioner, Ministry of Railways,
Government of India
Member (Finance), Telecom Commission, Government
of India
Additional Secretary (Budget), Ministry of
Finance, Department of Economic Affairs,
Government of India.
Financial Advisor, Ministry of Communications
Information Technology, Department of Posts,
Government of India.
Finance Secretary, Government of Andhra Pradesh.
Finance Secretary, Government of Madhya Pradesh
Finance Secretary, Government of Assam
Finance Secretary, Government of Maharashtra
Controller General of Accounts, Ministry of
Finance, Department of Expenditure, Government of
India (Convenor)

Mandate of the Apex Committee
Facilitate an integrated approach in the
implementation of accrual accounting across Union
and the State Governments in order to maintain
uniformity in the accounts.
To lay down detailed plan of action for
scheduling of different activities in relation to
different Ministries/Departments.
To evolve accounting policies and standards in
relation to, implementation of accrual
accounting.
To formulate the accounting heads of accounts for
accrual accounting and reporting.
To make/streamline arranements for accounting
data flow and to define role and relationship
amongst various officials dealing with
transitions and accounting.
To work out and lay down modalities for
identification of assets and creating assets
register for physical assets.
To work out and lay down the modalities for
identification of liabilities
To build capacity in terms of human resources for
managing transition, implementation and
management of accrual accounting system.
To develop IT systems for introduction and
implementation of accrual accounting.
To Commission pilot studies and oversee pilot
implementation in the Union and State
Governments.
To facilitate experience sharing and resolution
of issues faced by different stakeholders.
To examine the applicability of the accrual
accounts/ reports in the case of the
Appropraition Accounts and Finance Accounts.