Defence Account code 2014.pdf

DEFENCE ACCOUNT CODE I. HISTORY The DEFENCE ACCOUNT CODE has its origin in the CIVIL ACCOUNT CODE (VOLUME - I to VOLUME-IV). The first edition of Account Code Volume –I was approved on 23rd December, 1938 and released in 1940 by...

DEFENCE ACCOUNT CODE I. HISTORY The DEFENCE ACCOUNT CODE has its origin in the CIVIL ACCOUNT CODE (VOLUME - I to VOLUME-IV). The first edition of Account Code Volume –I was approved on 23rd December, 1938 and released in 1940 by the Accountant General of India with the approval of Lord Linlithgow, the Governor General of India. The first edition of Defence Account Code was released in 1952 followed by an edition in 1967, a reprint in 1977 and another edition in 1994. The current edition of 2014 has been revised and updated after a hiatus of twenty years. It has eighteen chapters. II. SALIENT FEATURES This edition includes Paras /Chapters dealing with: Clarification and Accounting of Capital Expenditure; e-payment including e- FPB (SBI, CMP Branch); Reconciliation of RBI,SBI transactions; e-ticketing; Accounting of foreign procurements, and Recording and Review of outstanding balances.  DEFENCE ACCOUNTS DEPARTMENT DEFENCE ACCOUNT CODE 2014 For use of Defence Accounts Department only Issued by the authority of CONTROLLER GENERAL OF DEFENCE ACCOUNTS  PREFACE The Defence Accounts Code encompasses the entire gamut of the accounting function discharged by the Defence Accounts Department. It contains detailed instructions and procedures relating to accounting, compilation, consolidation of annual accounts and inter- departmental/inter-governmental adjustments. Over the course of the last twenty years, significant changes have been introduced in the transaction of government business and accounting starting from the restructuring of the Demands for Grants pertaining to MoD. Within the Department, significant changes have been made in automation of systems of payment and accounting of expenditure. There was thus a need to reflect these in the Code, replacing those provisions that have been rendered redundant in view of these changes. Thus, while the basic principles and broad structure of accounts remain the same, certain newly introduced areas such as e-payment, e-ticketing have been incorporated. New Appendices have been incorporated on the Review of Balances and Reconciliation of Defence transactions. In addition, some of the existing provisions have been simplified for the ease of understanding e.g the Focal Point Branch Scheme. Any additions or alterations which may be necessary to the Code will be notified periodically by PCDA (SC), Pune, with the prior approval of the CGDA. All issues arising out of the interpretation of any of the provisions listed herein or any proposals for amendments shall be referred to the CGDA through PCDA (SC) Pune. This Edition of the Defence Account Code supercedes the 1994 Edition. Delhi Cantt. (Vandana Srivastava) Dated 01-07-2014 Controller General of Defence Accounts  INDEX S. No. Para Page Definitions CHAPTER-1 GENERAL 1. Authority competent to prescribe the forms for 1 6 maintaining Defence Services Accounts 2. Departmentalisation of accounts 4 6 3. Compilation of departmentalised accounts 5 7 4. General duties of Controller General of Defence 6 7 Accounts as a Chief Accounting Officer 5. General duties of PCDA/CDA as an Accounting Officer 7 8 6. Miscellaneous 11 9 CHAPTER-2 GENERAL OUTLINES OF THE SYSTEM OF ACCOUNTS 7. Consolidated Fund, Contingency Fund and Public 15 10 Account of India 8. Accounts of the Central and State Governments with 18 10 Banks 9. Transactions of other Government in State Treasuries 20 11 10. State transactions in Central Treasuries 21 12 11. General outlines of the system of Defence Services 22 12 Accounts 12. Mode of settlement of Defence transactions 23 13 13. Central Journal and Ledger 24 14 14. Statement of Central Transactions of Defence Services 25 14 Receipts and Charges 15. Annual Finance Accounts of the Central Government 26 15 16. The Combined Finance and Revenue Accounts of the 27 15 Central and State Governments in India CHAPTER-3 GENERAL PRINCIPLES AND METHOD OF ACCOUNTS 17. General Period of Account 29 16 Cash Basis of Accounts 30 17 Currency in which Accounts are kept 31 17 18. Forms of Accounts Main Divisions of Accounts 32 17 Major, Minor, Detailed and Object Heads 34 20 Classification in the books of Ministry of Defence 35 20 Objectives of Classification 36 21  Guidelines for opening a new code 37 21 Pamphlet of RD&R/Classification Hand Book of 38 22 Defence Services Receipts and Charges Classification of Expenditure as “Charged” or “Voted” 39 22 19. Classification of Transactions in Accounts General Limitations 40 23 20. General Principles of Classification 41 23 21. Classification of Capital and Revenue Expenditure 42 23 Criteria for determining whether expenditure should be 43 24 classified under heads of Capital section or Revenue section of the Consolidated Fund of India Allocation between Capital and Revenue expenditure 44 24 on a Capital Scheme Capital receipts during construction mainly to be 45 25 utilised in reduction of Capital expenditure Receipts and recoveries representing recoveries of 46 25 expenditure previously debited to Capital Major Head Capital cost of non-productive work to be met from 47 25 ordinary revenues Conversion of outstanding loans into equity 48 26 investments or Grants-in-Aid Charging of interest on Capital outlay met out of 49 26 specific loans raised by Government Record of Capital Expenditure in Accounts 50 26 22. Important General Orders Governing Classification 51 27 Pay and Allowances 51 (a) 27 Transit Pay and Allowances of Service Personnel 51 (b) 27 Transit Pay and Allowances of DAD Personnel 51 (c) 28 Travelling Allowances 52 28 Contribution made by Government 58 29 Refunds of Revenue 59 29 Classification of transactions under "Civil Advances" 60 (a) 29 Classification of Transactions under Pay/TA on transfer 60 (b) 30 Classification of Advances for Law Suits 60 (c) 30 23. Classification of transactions under Suspense 61 30 24. Important special orders governing classification of 62 30 certain individual transactions- Cost of Acquisition of Land Sale proceeds of Government land and buildings 63 30 Cost of Survey of India and other Scientific Parties 65 31 accompanying a Military Expedition 25. General methods of accounting Classification of refunds of bonafide receipts and 66 32  recoveries of overpayments Write off from "balance" heads to "Government 67 32 Account” Correction of Accounts 68 33 26. Transfer entries and check of classification 69 34 Periodic Transfers/Adjustments 70 34 Checks of Classification of Receipts and Charges 71 34 Powers of signing Punching Medium 72 35 Examination of Compiled Actuals 73 36 CHAPTER-4 RULES REGULATING INTER-DEPARTMENTAL TRANSFERS 27. Introductory 75 37 28. Inter-departmental adjustments with other 76 37 departments of the Central Government 29. Adjustments with State Governments 78 38 30. Adjustments with outside bodies 79 38 31. General 80 38 CHAPTER-5 RULES REGULATING ACCOUNTING OF RECOVERIES OF EXPENDITURE IN GOVERNMENT ACCOUNTS 32. Introductory 84 40 33. Recoveries from private persons or bodies and 85 40 Governments outside India 34. Recoveries of expenditure on works in progress and 86 40 transactions of stock and other suspense account 35. Recoveries by one Government from another (within 87 40 India) 36. Classification of recoveries made by one department 88 41 from another department of the same government 37. Receipts and recoveries on Capital account 89 41 38. Settlement of doubts or disputes 90 42 CHAPTER-6 GENERAL RULES AND PROCEDURE APPLICABLE TO DEFENCE PROFORMA ACCOUNT 39. Introductory 92 43 40. Defence transactions at bank treasuries 94 (a) 43 Concept of Focal Point Branch 94 (b) 44 Dealing Branches 94 (c) 44 Verification of DMS/MSS 94 (j) 45 Electronic Payments through e-FPB 95 45 Electronic payments through Private Sector 96 46 Banks/PSBs 41. Defence Transactions through e- Ticketing 97 46 RBI as FPB 98 46  Compilation to be made under Suspense Head under 99 47 Defence Proforma Account on introduction of FPB Scheme with effect from 01-10-1993 42. Defence transactions at non-bank treasuries 101 47 43. Advice of clearance 102 47 44. Memo of Clearance by the Reserve Bank 105 48 45. Monthly Settlement Account 106 48 46. Accounting heads 107 48 47. Adjustments of transactions relating to the months of 108 49 February and March Proforma adjustments outside the Books of RBI 109 49 48. Inter-Government and inter-departmental adjustments 110 49 49. Works/stores expenditure and services rendered 114 53 CHAPTER-7 DETAILED ACCOUNTING PROCEDURE REGARDING ADJUSTMENT OF DEFENCE PROFORMA TRANSACTIONS 50. Remittances into Banks and Treasuries on Military 116 56 Receivable Order 51. Remittances to Defence Services from banks and 117 57 treasuries i.e., cheques drawn on Banks & Treasuries Adjustment of electronic advice-payments through 118 59 RBI/SBI Adjustment of e-payments- Private Sector Banks / 119 59 Public Sector Banks 52. Transactions originating in the books of Railways, Posts 120 59 and MEA (in respect of ILAC, Washington and other embassies a/c) due for final adjustment in Defence accounts 53. Transactions originating in the Defence books which 121 61 are adjustable against the balances of Railways/Posts/Department of Supply in the Ministry of Commerce (stores transaction) Adjustment of expenditure on account of stores 122 (a) 62 relating to central purchase made through DGS&D Action by PAO, DGS&D 122 (b) 62 Action by the DAD Cell 122 (c) 62 Action by Accounts Section of the PCDA/CDA under 122 (d) 63 whom the Cell is functioning Action by the consignee PCDA/CDA 122 (e) 63 Adjustment of Central Purchase Voucher 122 (g) 63 54. Accounting instructions for settlement of inter departmental/inter Government transactions Settlement of Outward Transactions (Cash basis) 123 63 Settlement of Inward Transactions (Cash basis) 124 65 55. Adjustment of e-Ticketing transactions on Cash basis 125 66 56. Drawal of advances on the authority of Emergency 126 66 Cash Requisitions Bank Treasuries 126 (a) 66 Non-Bank Treasuries 126 (b) 67 57. Defence transactions arising in Jammu and Kashmir 127 67 State and vice versa 58. Reconciliation of balances in the books of Reserve 128 68 Bank 59. Treatment of incorrect and incomplete debits/credits 129 68 Verification and Reconciliation 130 71 CHAPTER-8 EXCHANGE ACCOUNTS BETWEEN PR. CONTROLLERS/ CONTROLLERS OF DEFENCE ACCOUNTS 60. General 134 91 61. Works undertaken by the MES on behalf of Air Force, 135 94 Ordnance Factories and Navy 62. Action by the Originating PCDA/CDA office 137 95 Action by the Responding PCsDA/CsDA office 141 97 Clearance of outstanding items 145 97 List for Manual Linking 147 98 63. Accounts for March Supplementary and March 149 98 Supplementary Corrections 64. Defence Exchange Accounts 150 98 65. Annual Abstracts of Progress Registers 151 98 CHAPTER-9 ADJUSTMENT OF FOREIGN TRANSACTIONS 66. Defence transactions arising in England and adjustable 154 104 in India 67. Transactions finally audited in England 157 105 68. Embassy accounts other than ILAC 160 106 69. Transactions relating to Defence Pension payments 161 107 made by embassy of India at Nepal 70. Settlement of transactions other than ILAC/embassy 162 107 and pension 71. Accounting of pay and allowances of DAD staff and 163 107 officers posted abroad 72. Accounting of foreign procurements 164 108 CHAPTER-10 COMPILATION OF ACCOUNTS 73. General 167 110 Class of Vouchers 168 110 74. Various compilations prepared by EDP Centre and 170 111 their disposal  CHAPTER-11 MAINTENANCE OF DEFENCE LEDGER AND VERIFICATION OF BALANCES 75. General 172 115 76. Posting of Defence Ledger 173 115 77. Closing of books 174 115 78. Preparation of Annual Review of Balances 175 116 Treatment of Exchange Accounts 176 116 Verification of Balances 177 116 Verification of correctness of Statements of Finance 178 117 Accounts Certification of Balances 179 117 79. Review of outstanding Balances 180 118 Details to be recorded in the review 185 119 Security Deposits 189 120 Review of Balances on Account of Loans and 190 120 Advances 80. Verification of Balances under sub-head “G-MES 191 120 Advances" of Minor Head 111-Expenditure on works (Other than capital projects) maintenance, etc. CHAPTER-12 ESTIMATES 81. Section I-Budget Estimates for Service Heads 193 124 Periodical Review and Estimates 194 124 Estimates for Centrally Controlled Heads 195 125 Estimates for Locally Controlled Heads 196 125 Miscellaneous 199 126 82. Section II-Budget Estimates prepared by the Defence Accounts Department Budget Estimates for Centrally Controlled Heads 202 126 Budget Estimates for Locally Controlled Heads 203 127 General 204 128 83. Budget Estimates for Defence Pensions 205 128 84. Budget estimates for Heads pertaining to DAD 207 129 Control over expenditure under Locally Controlled 209 129 Heads pertaining to the Defence Accounts Department 85. Section III-Cash Requirement Estimates of Defence Services Cash Requirement Estimates for the ensuing Financial 210 129 Year Revised Cash Requirement Estimates for the current 214 131 Financial Year 86. Section IV-Miscellaneous 215 131  CHAPTER-13 BUDGETARY CONTROL OVER DEFENCE EXPENDITURE 87. Introductory 217 132 88. Vote on Account 220 132 89. Control over expenditure 221 133 90. Expenditure susceptible to local control 223 134 91. Initial distribution of budget grants 225 134 92. Watching expenditure against allotments 228 134 93. Re-appropriation 232 135 94. Loans and advances 233 137 CHAPTER-14 CASH ASSIGNMENTS 95. Cash Assignments 235 138 96. Reduction of Cash Assignments 236 138 97. Register of Cash Assignments 237 138 CHAPTER-15 DEPOSITS 98. General 238 139 99. Different kind of deposits in Defence Services 242 139 100. Transactions compilable under various deposit Heads Donation/contribution towards National Defence 243 140 Academy Security Deposits 244 140 Treasure Chest Deposits 248 140 Field Deposits 249 141 Trust Interest Fund 250 141 Unclaimed General Provident Fund Deposits, 251 141 Unclaimed Deposits in Defence Savings Provident Fund, Unclaimed Deposits in Defence Services Officers Provident Fund, Unclaimed Deposits in Defence Services Personnel Provident Fund Unclaimed Contributory Provident Fund Deposits 252 141 Unclaimed Deposits in Other Miscellaneous Provident 253 141 Funds Miscellaneous Deposits 254 141 101. Lapsed Deposits 255 142 102. Reconciliation of postings in the deposit registers and 257 143 verification of balances  CHAPTER-16 ADVANCES AND SUSPENSE 103. Section I-Loans and Advances General 261 144 104. Different types of advances in Defence Services 272 146 Permanent Advances 273 147 Border Roads Treasure Chest 274 (1) 147 Field Cashiers' Account 274 (2) 147 Advances adjustable in PCDA/CDA Offices 274 (3) 147 Pay Accounts Offices 274 (4) 147 Repayable (non-voted) 274 (5) 148 Imprest Holders' Accounts 274 (6) 148 Miscellaneous Advances 274 (7) 148 Other Advances 274 (8) 148 105. Interest bearing Advances 275 148 106. Regimental and other Loans—Defence 280 149 107. Reconciliation of postings in registers and verification 283 149 of balances Acknowledgement of balances 285 150 108. Section II-Suspense Accounts 286 150 CHAPTER-17 ACCOUNTING OF EXPENDITURE MET OUT OF THE CONTINGENCY FUND OF INDIA AND OF "CHARGED" EXPENDITURE 109. Advances from Contingency Fund of India 290 152 110. “Charged" Expenditure 292 152 Satisfaction of decrees/Arbitral award in respect of 298 154 compensation for requisition or acquisition of properties of Defence 111. Provision of Funds 299 155 112. Accounting procedure in respect of expenditure met 300 156 from the Contingency Fund of India 113. Maintenance of statistics of expenditure classified as 302 157 “Charged” CHAPTER-18 MISCELLANEOUS 114. Sanctions by the Chiefs of Staff for non-recurring 303 158 payments 115. Military Receivable Orders 305 159 116. Receipt of Cash, cheques, etc 306 159 117. Corrections in documents 308 159 118. Special expenditure on account of field operations and 309 159 special services  119. Rounding off the transaction to the nearest rupee 310 160 120. Adjustments with Pakistan 311 161 121. Classification of losses 312 161 Classification of losses of buildings, lands, stores and 313 162 equipment Classification of losses or deficiencies of cash in hand, 314 162 whether in treasuries or in departmental charge Classification of irregular and unusual payments 315 162 Classification of inevitable losses 316 162 122. Grants-in-Aid 317 162 APPENDICES APPENDIX I List of Sections/Sectors/Sub-Sectors under the 163 main Division of Accounts APPENDIX II List of Standard Object Heads 169 APPENDIX III Principles and rules regulating the distribution of 173 certain charges and receipts between Governments APPENDIX IV Annual and periodic adjustments 182 APPENDIX V Flow Chart of functioning of FPB 184 APPENDIX VI Focal Point Branches nominated for Ministry of 186 Defence APPENDIX VII Dispensing with monetary settlement of inter- 188 departmental transactions APPENDIX VIII Reconciliation of Defence Transactions/RB Deposits 190 APPENDIX IX Maintenance of Defence Ledger and preparation of 218 Annual Review of Balances APPENDIX X List of Locally Controlled Heads 271 APPENDIX XI Demand for grants for Defence and Integrated 280 Financial Advice System INDEX Alphabetical Order for Reference 281  DEFINITIONS In this code, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them – that is to say:- 1 "Accountant means the Head of an office of Accounts including Principal General" Accountant General subordinate to the Comptroller and Auditor General of India, and when used in relation to a treasury, the head of an office of accounts to whom the accounts of the treasury are rendered; 2 "Accounts Area" means an area the accounts of which are dealt with by one and the same Accounts Officer; 3 "Accounts Officer" means the Head of an Office of Accounts or the Head of a Pay and Accounts Office set up under the scheme of departmentalization of accounts; 4 "Accredited Bank" means in relation to a Ministry or Department, or Union territory means the Reserve Bank or any bank which is appointed to transact business of the Government pertaining to that Ministry or Department or Union territory; 5 "Appropriation" means the assignment, to meet specified expenditure, of funds included in a primary unit of appropriation; 6 "Bank" means Reserve Bank of India or any of its offices or branches, any branch of the State Bank of India acting as the agent of the Reserve Bank of India in accordance with the provisions of the Reserve Bank of India Act, 1934 (2 of 1934), any branch of a subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) which is authorised to transact Government business as agent of the State Bank of India, or any branch of a bank including four private sector banks ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd and IDBI Ltd , as may be appointed by the Reserve Bank of India as its agent under the provisions of sub-section (I) of section 45 of the Reserve Bank of India Act, 1934 (2 of 1934); 7 "Bank Treasury" means a treasury the cash business of which is conducted by the Bank (i.e. the Reserve Bank of India or any office or agency of the Reserve Bank of India and includes any branch of the State Bank of India or its subsidiaries acting as the agent of the Reserve Bank of India) and a " Non-Bank treasury" means a treasury other than a Bank treasury; 8 "Central Treasury" means and includes any treasury or sub-treasury not being a treasury or sub-treasury under control of a State Government; 9 "CGDA" means the Controller General of Defence Accounts, the Head of the Defence Accounts Department 1 10 "Cheque Drawing means a drawing and disbursing officer functioning under a DDO" Ministry or Department (including Central Public Works Department, Forest Department and Departments in which the provisions of Central Public Works Account Code are authorised to be followed) or a union territory, who is authorised to withdraw money for specified types of payments against an assignment account opened in his favour in a specified branch of an accredited bank; 11 "Chief Accounting means the Secretary of a Ministry or Department of the Authority" Government of India in which the Departmentalised System of Accounting has been introduced and in the case of a Union Territory with separated accounts, its Chief Secretary/ Chief Commissioner; 12 "Civil Accounts means an Accounts Officer subordinate to the Comptroller and Officer" Auditor General, or Principal Accounts Officer and/or Pay and Accounts Officer functioning under the scheme of departmentalization of Central Government (Civil) Accounts or separated accounts set up of a Union Territory Government or Administration as the context may imply. In relation to Railways, Department of Post, it means the heads of their Accounts Office and Officers subordinate to them; 13 "Competent means, in respect of power to be exercised under any of the Authority" GFR Rules, the President or such other authority to which the power is delegated by or under GFR, Delegation of Financial Power Rules, 1978 or any other general or special orders issued by the Government of India; 14 "Comptroller and means the Comptroller and Auditor General of India appointed Auditor General" under article 148 of the Constitution of India; 15 "Consolidated Fund " means the Consolidated Fund of India as referred to in clause (1) of Article 266 of the Constitution; 16 "Constitution" means the Constitution of India; 17 "Contingency Fund" means the Contingency Fund of India established under the Contingency Fund of India Act, 1950 (49 of 1950) in pursuance of clause (1) of article 267 of the Constitution; 18 "Controller General means the Controller General of Accounts in the Ministry of of Accounts" Finance (Department of Expenditure), who inter alia, is responsible for prescribing the form of accounts of the Union and States, and to frame, or revise, rules and Manuals relating thereto on behalf of the President of India in terms of article 150 of the Constitution of India, on the advice of the Comptroller and Auditor General of India; 19 "Debt Heads" In relation of Ministry of Defence means the head of accounts under which transactions of Government closing to balances are recorded and carried forward to the next financial year which includes heads of Debts, Loans and Advances, Provident Funds, Reserve Funds, Deposits and Advances and Suspense and Miscellaneous; 2 20 "Defence Accounting means the offices of the Defence Accounts Department Circles" including Controller General of Defence Accounts, who are nominated by the RBI to accounts for and reconcile transactions in the Defence Proforma Account. Note :- CGDA Delhi Cantt, PCDA (Pensions) Allahabad, PCDA (Officers) Pune, PCDA (SC) Pune, PCDA Bangaluru, PCDA (WC) Chandigarh, Principle Controller of Accounts ( Fys ) Kolkata, PCDA (AF) Dehradun, PCDA (Navy) Mumbai, PCDA (NC) Jammu, PCDA New Delhi, PCDA (R&D) New Delhi, PCDA (CC) Lucknow, PCDA (BR) Delhi Cantt, PCDA (SWC) Jaipur, CDA Patna, CDA (Army) Meerut, CDA (Funds) Meerut, CDA Chennai, CDA (CSD) Mumbai, CDA (PD) Meerut, CDA Guwahati, CDA (R&D) Bangalore, CDA Secunderabad, CDA Jabalpur, CDA (AF) New Delhi, CDA (R&D) Hyderabad, CDA (IDS) New Delhi, ZO (DPD) Chennai, AO, DAD, MOD (Civil) New Delhi, are Defence Accounting Circles; 21 "Disbursing Officer" means a Head of the Office and also any other Gazetted Officer so designated by a Department of the Central Government or an Administrator, to draw bills and make payments on behalf of a Central Government. The term shall also include a Head of the Department or an Administrator where he himself discharges such functions; 22 "EFT" is the electronic exchange, transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems; 23 "Financial Year" means the year beginning on the 1st of April and ending on the 31st of March following; 24 "Government" means the Central (Union) Government or a State Government, or a Union Territory Government, or all the three, as the context may imply; 25 "Local Fund" means a local fund as defined in Rule 652 of the Treasury Rules; 26 "NEFT" means National Electronic Fund Transfer, a nation wide payment facilitating one-to-one funds transfer scheme in which, individuals, firms and corporate can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the scheme; 27 "Principal Controller" “Controller" or "Controller of Defence Accounts" means an or "Controller Accounts Officer under the Administrative control of the of Defence Controller General of Defence Accounts, who is responsible for Accounts" the maintenance and internal audit of the accounts of Defence Services in his jurisdiction. The term includes : Principal Controller of Defence Accounts, New Delhi Principal Controller of Defence Accounts, Dehradun Principal Controller of Defence Accounts (WC), Chandigarh 3  Principal Controller of Defence Accounts, Bengaluru Principal Controller of Defence Accounts (SWC), Jaipur Principal Controller of Defence Accounts (SC), Pune Principal Controller of Defence Accounts (R&D), New Delhi Principal Controller of Defence Accounts (Pensions), Allahabad Principal Controller of Defence Accounts (Officers), Pune Principal Controller of Defence Accounts (NC), Jammu Principal Controller of Defence Accounts (Navy), Mumbai Principal Controller of Defence Accounts (CC), Lucknow Principal Controller of Defence Accounts (BR), New Delhi Principal Controller of Accounts (Fys), Kolkata Controller of Defence Accounts, Secunderabad Controller of Defence Accounts, Patna Controller of Defence Accounts, Jabalpur Controller of Defence Accounts, Guwahati Controller of Defence Accounts, Chennai Controller of Defence Accounts (R&D), Hyderabad Controller of Defence Accounts (R&D), Bengaluru Controller of Defence Accounts (PD), Meerut Controller of Defence Accounts (IDS), New Delhi Controller of Defence Accounts (Funds), Meerut Controller of Defence Accounts (CSD), Mumbai Controller of Defence Accounts (Army), Meerut Controller of Defence Accounts (AF), New Delhi 28 "Public Account" means the Public Account of India or the Public Account of a State referred to in clause 2 of Article 266 of the Constitution or both as the context may imply; 29 "Reappropriation" means the transfer of funds from one primary unit of appropriation to another such unit; 30 "Remittance Heads" Remittance Heads Refer to head of accounts to which transactions relating to remittance business are taken. Note :-In relation of Ministry of Defence Cash Remittances and adjustments between officers rendering accounts to the same Accounts Officer , (Major Head 8782) Adjusting Account with Railways and Department of Post (Major Head 8787 and 8788) and Exchange Account (Major Head 8797); 31 "Reserve Bank" means any office or branch of the Banking Department, of the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934 (2 of 1934); 4 32 "Revenue Heads" refer to the heads of account under which are recorded all proceeds of taxation and other receipts classed as revenue and the expenditure met therefrom; 33 "RTGS" means Real Time Gross Settlement of fund transfers individually on an order basis (without netting). The funds settlement takes place in the books of RBI of India. It is primarily meant for large value transaction with a minimum amount to be remitted is Rs 2 Lakhs; 34 "SBI-CMP" means State Bank of India-Cash Management Product, a customized and secured payment gateway for Central Government Departments including Defence Accounts Departments which will be a uniform and approved process across the country with stricter Turn Around Time (TAT); 35 "Sub Audit means an Account Officer who performs accounting functions (Accounts) Officer" on behalf of another Account Officer; 36 "Treasury Rules" means the Treasury Rules of the Central Government. 5  CHAPTER 1 GENERAL AUTHORITY COMPETENT TO PRESCRIBE THE FORMS FOR MAINTAINING DEFENCE SERVICES ACCOUNTS 1. The Ministry of Defence (Finance) of the Govt. of India is to ensure that suitable accounts are maintained by the Defence Services. Accordingly, the Pr. Controllers/ Controllers should seek the intervention of that Ministry, through the Controller General of Defence Accounts in cases in which the forms of initial or other accounts or of bills, prescribed by competent authority, are deviated from. 2. The forms in which the accounts should be kept in the offices of the Defence Accounts Department are prescribed by the Controller General of Defence Accounts, with the approval of the Defence Secretary and Financial Adviser but if any change affects the form of the Finance and Revenue Accounts, it will not be made without the previous sanction of the Controller General of Accounts and Comptroller and Auditor General. Note: The word 'form' has comprehensive meaning so as to include the prescription not only of the broad form in which the accounts are to be kept but also the appropriate heads under which certain transactions or classes of transactions have to be entered. 3(a) The Government of India may require any information which can be derived from the accounts maintained in an Accounts office, and for this purpose an Accounts Office of the Defence Accounts Department may find it necessary on occasions to make slight amendments in the forms for maintaining accounts. All changes in the prescribed forms and procedure should be referred to the Controller General of Defence Accounts. (b) All returns, accounts and statements required by the Controller General of Accounts and Comptroller and Auditor General should invariably be prepared in the forms prescribed by them. DEPARTMENTALISATION OF ACCOUNTS 4(a) From 1st October, 1976 onwards, the responsibility for compiling the accounts of Defence Services including those relating to taxes, duties and other receipts and deposits realised or refunded under any law has been entrusted to the Controller General of Defence Accounts. (b) The Controller General of Defence Accounts functions on behalf of Secretary Defence (Finance)/ Financial Adviser (Defence Services), as the Chief Authority in all matters affecting financial advice, internal audit and the accounting in respect of expenditure pertaining to the Defence Services. Under the scheme of Departmentalisation of accounts in the Ministry of Defence, the Defence Secretary will be the Chief Accounting Authority for all transactions of the Ministry of Defence and this responsibility is discharged by him through and with the assistance of Secretary Defence (Finance)/ Financial Adviser (Defence Services), who will function for and on behalf of the Chief Accounting Authority. The payments and accounting functions in respect of the Ministry of Defence are entrusted to the Controller General of Defence Accounts who will function as the Principal Accounting Officer. 6  Controller General of Defence Accounts on behalf of Chief Accounting Authority (the Secretary of Ministry of Defence) is responsible for the compilation and consolidation of the accounts of the Ministry of Defence in the prescribed form and their timely rendition to the Controller General of Accounts. The Controller General of Defence Accounts, on behalf of Chief Accounting Authority arranges payments of Defence Services through Principal Controllers/Controllers Office and the cheque drawing DDOs and is also responsible for arranging internal audit of all expenditure. COMPILATION OF DEPARTMENTALISED ACCOUNTS 5. The Defence Accounts Department classifies expenditure in respect of (i) Defence Services paid from Defence Service Estimates and (ii) Civil organisations under Ministry of Defence including Defence Accounts Department, mentioned below, which are paid from the civil grant of Ministry of Defence : (i) Armed Forces Tribunal (ii) Coast Guard Organisation (iii) Department of Defence (iv) Department of Defence Production (v) Department of Defence Research and Development (vi) Department of Ex-Servicemen Welfare (DESW) (vii) Defence Accounts Department (viii) Defence Estates Organisation (ix) Jammu and Kashmir Light Infantry (x) Canteen Stores Department GENERAL DUTIES OF CONTROLLER GENERAL OF DEFENCE ACCOUNTS AS A CHIEF ACCOUNTING OFFICER 6. The CGDA is responsible for the following items of work under the scheme of departmentalisation, performed for and on behalf of the Chief Accounting Authority:- (a) Consolidation of the accounts of the Ministry of Defence in the manner prescribed by CGA; (b) Arranging all payments of Defence Services through PCsDA/CsDA, Drawing and Disbursing Officers of the Services wherever they are authorized to make certain types of payments; (c) Submission of Statement of Central Transactions and material for the Finance Account of the Defence and Defence (Civil) to the Controller General of Accounts; (d) Preparation of annual Statement of Central Transactions (SCT) of Defence Services Receipts and Charges and rendition to the Controller General of Accounts, Ministry of Finance, Department of Expenditure, New Delhi on the date prescribed by them; (e) Preparation of certain subsidiary statements in connection with the Appropriation Accounts as prescribed in Defence Audit Code and submit them to the Financial Adviser, Defence Services/Secretary (Defence Finance). CGDA also renders annually an Audit Certificate on the accounts of the Defence Services; to the Financial Adviser, Defence Services/Secretary (Defence Finance); (f) Preparation of the portion of the Combined Finance and Revenue Accounts pertaining to Defence Services and its submission to the Controller General of Accounts and Director General of Audit, Defence Services for incorporation in the combined Finance and Revenue accounts of the Central and State Government in India; 7 (g) Preparation of the Appropriation Accounts of the Civil Estimates of the Ministry of Defence and sending the same to the Financial Adviser, Defence Services/Secretary (Defence Finance) and the Defence Secretary for onward transmission to the Controller General of Accounts and Director General of Audit, Defence Services. GENERAL DUTIES OF PRINCIPAL CONTROLLER/CONTROLLER AS AN ACCOUNTING OFFICER 7. Pr Controller/Controller is the chief authority of Auditing & Accounting function in respect of Formations/Units under their jurisdiction. Accounting duties and functions can be put into the following broad categories- (i) Receipts, Disbursements and Accounts: (a) To collect accounts of all receipts and disbursements in the accounts area; (b) Ensure accurate and timely payments in conformity with prescribed rules and regulations; (c) Timely realization of receipts and credit in Government Account; (d) To transfer to other Accounts Circle the items originating in their area pertaining to them and adjusting in his accounts the items transferred to him by other Accounts Officers. (ii) Financial Management Systems: (a) To keep a watch over the progress of expenditure for the area under the locally controlled heads against sanctioned allotments and to bring to the notice of the allottees and the immediate higher authorities, cases in which the progress of expenditure is abnormally heavy or unusually low; (b) Responsible for the implementation of financial information systems as prescribed by the Controller General of Defence Accounts and to provide necessary material in respect of reports of Annual Finance Accounts; (c) Cash requirement Formulation; (i) The Pr Controllers/Controllers will support the Controller General of Defence Accounts towards formulation of cash requirements in respect of various heads (other than budgetary heads). (ii) They would formulate the budgetary requirements of the DAD and render estimates to the CGDA. 8. Each Pr. Controller/Controller is responsible for the accuracy and efficient working of the numerous processes of which the monthly account is the outcome. He should keep himself thoroughly acquainted with the progress of receipts and expenditure, so as to be able to promptly bring to notice any matter demanding attention. He is charged with the administration of those numerous matters in his area, of which Government is debtor or creditor, and it is his duty to see that proper accounts are kept of all those transactions and that due measures are taken for their adjustment without undue delay. He settles accounts with other Accounts Officers and it is his duty to see that these accounts are promptly settled. The Pr. Controller/Controller has the care of the pecuniary relation of the Defence Services of the Government of India in his area with other Governments, Departments, individuals and bodies and for this purpose he is not merely to keep the accounts but also to watch and in some cases to direct the matters out of which the accounts arise. 9. Each Pr. Controller/Controller is responsible for ensuring that all transactions for which necessary monetary settlement has been effected against the Defence balance by 8 other Accounts Offices are speedily adjusted in Defence books and are not left outstanding in the suspense heads for an unduly long period. 10. Each Pr. Controller/Controller is responsible for maintaining the details of the amount due to or by Government working upto the balance on his own books. He is further responsible for reviewing these balances at the end of each year in the manner prescribed in chapter 11 and for submitting a copy of his review of balances along with statement 5 & 13 to the CGDA. Copies of the review of balances are also furnished to Pr. Director/Director of Audit Defence Services for audit. CGDA will prepare statement No. 5 &13 of Union Government Finance Account and send the same to the CGA. MISCELLANEOUS 11. No requisition for submission to an Accounts Office of new account returns should be issued by the Pr. Controller/Controller without reference to the Controller General of Defence Accounts and if the requisition is to an officer not subordinate to the Pr. Controller/Controller, the views of the local administrative authorities should first be obtained. 12. All communications on matters affecting the classification of Receipts and Charges and on form and procedure relating to accounts should always be addressed to the Controller General of Defence Accounts. 13. Pr. Controllers/Controllers should not address the Comptroller and Auditor General and Controller General of Accounts direct except on routine matters 14. Pr. Controllers/Controllers should not address Services Headquarters or the Ministry of Defence (Finance) directly, except on routine matters or in connection with the prescribed estimates and returns rendered direct to them. All questions involving interpretation of rules or procedural changes should be referred by the Pr. Controllers/Controllers to the Controller General of Defence Accounts. 9  CHAPTER 2 GENERAL OUTLINES OF THE SYSTEM OF ACCOUNT CONSOLIDATED FUND, CONTINGENCY FUNDAND PUBLIC ACCOUNT OF INDIA 15. The Central Government has a Consolidated Fund entitled "Consolidated Fund of India" into which the revenues received by the Central Government (including Union Territories), loans raised by that Government by the issue of Treasury Bills, loans or ways and means advances and moneys received by the Government in repayment of loans are credited, and from which the expenditure of that Government when so authorized by the Parliament, is met. The Central Government also has a Public Account entitled "Public Account of India", into which all other public moneys received by, or on behalf of the Central Government (including Union Territories) are credited and from which disbursements are made in accordance with the prescribed rules. The procedure to be followed for the payment into and the withdrawal, transfer or disbursement of moneys from the "Consolidated Fund" and the "Public Account" for the custody of moneys standing in that Fund and Account, is regulated by law made by the Parliament and pending such legislation by the rules made by the President under Article 283 of the Constitution. 16. The Central Government has a separate Contingency Fund entitled "The Contingency Fund of India". The Fund will be at the disposal of the President to enable advances to be made by him for meeting unforeseen expenditure, pending authorisation of such expenditure by Parliament under appropriations made by law. The procedure to be followed for the custody of the payment of moneys into and the withdrawal of moneys from such fund is regulated by law made by the Parliament and pending such legislation, by the rules made by the President (Also see Para 290 and 291). Note: Though the transactions of the Railways, Department of Posts and Department and the Defence Services form part of the Consolidated Fund, the Contingency Fund and the Public Account of India, they are nevertheless taken against the "Railway Fund", "Post and Telegraphs Account" and "Defence Account" which have been created proforma in the books of the Reserve Bank of India. 17. Save as may be specifically provided in any case, cash balances in the Consolidated Fund or Contingency Fund and Public Account of India are either held in a Government treasury or kept with the Bank. ACCOUNTS OF THE CENTRAL AND STATE GOVERNMENTS WITH THE BANK 18. The Central Government and each of the State Governments have made separate arrangements with the Reserve Bank of India by virtue of which the general banking business of these Governments (in which business includes the receipt, collection payment and remittance of money on behalf of Government) is carried on and transacted by the Bank in accordance with and subject to the provisions of the agreement and of the Reserve Bank of India Act, 1934 (printed as Appendix I to Compilation of the Treasury Rules Volume II) and in accordance with and subject to such orders as may from time to time be given to the Bank by the Central Government, or the State Government, as the case may be. The Central Government, as a general rule, operates on every office and branch of the Reserve Bank of 10 India and on every branch of the State Bank of India throughout India acting as the agent of the Reserve Bank and conducting Government business. 19(a) Complete accounts of the Central Government and individual account of all Civil Ministries/Departments, as well as accounts of Railways Fund, Posts, Telecommunications and Defence and Accountant General of States and of Accountant General accredited with Union Territory Governments/Administrations are maintained by the Central Accounts Section of the Reserve Bank of India, Nagpur. (b) All transactions/adjustments between the accounts of Central Government Ministries/Departments and State Governments are settled on cash basis by issue of Cheque/Demand Draft, except in the case of transactions between Defence and Department of Posts, Railways, Department of Supply in the Ministry of Commerce (Store transactions) and Ministry of External Affairs. (c) The transactions between Department of Posts, Railways, Department of Supply in the Ministry of Commerce (Store transactions) and Ministry of External Affairs (relating to High Commission of India, London (ILAC), Washington and Embassy Accounts received through Principal Accounts Officer of Ministry of External Affairs) are settled through "settlement accounts". The monetary settlement of such transactions through Central Accounts Section of the Reserve Bank of India, Nagpur is effected by the PCsDA/CsDA/Accounts Officer of the Ministry/Department concerned in whose books the transactions originate. (d) A statement of closing balance of each Government (States) / Ministry/ Department on the books of the bank is forwarded by the CAS, RBI, Nagpur to the Accounts Officer concerned at the close of the account of each month after adjusting transactions in its own books and taking all cash transactions in all branches of RBI, agency banks into account. Note:-Loans to State Governments budgeted under the Civil Estimates of Ministry of Defence (Major Head 7610-Loan and Advances to State Government) are also advised through CAS, RBI, Nagpur by AO (DAD),Ministry of Defence for credit to the State Government by CAS, RBI, Nagpur. TRANSACTIONS OF OTHER GOVERNMENTS IN STATE TREASURIES 20. Cash balances held in a State Treasury form part of the Consolidated Fund, the Contingency Fund (if one has been established) and the Public Account of the State to which the Treasury belongs. The Treasury rules of each State Government issued under Article 283 of the Constitution, however, provide that money may be received and payments may be made on behalf of the Central Government and other State Governments by a State treasury situated at a place where the treasury business is not conducted by the Bank, such receipts and payments being taken in the first instance against the cash balance of the State concerned. On receipt of intimation of such transactions through the monthly Treasury Account or otherwise the Accountant General settles the transactions with the Central Government or State Government as under:- (a) In case of transactions pertaining to other State Governments, the Accountant General makes the requisite adjustments through the Central Accounts Section of the Reserve Bank against the balances of the other State Governments concerned. This procedure is also applicable to money received in the office of the Accountant General on 11 behalf of another State and book entries made in the office of the Accountant General affecting the accounts of another State Government. (b) In case of transactions of Central Government, including Railways/Postal/ Defence Departments at State treasuries (both banking and non-banking), cash settlement is made by the State Accountant General with the Pay and Accounts Office through suspense by exchange of Cheque/Demand Draft (DD). Note: - Settlement of transactions between the State Government of Jammu and Kashmir and other States/ Centre is effected in cash or by demand drafts. STATE TRANSACTIONS IN CENTRAL TREASURIES 21. Cash balances held in the treasuries of the Central Government form part of the Consolidated Fund, Contingency Fund and the Public Account of India. Transactions on behalf of State Governments arising in central treasuries are settled in cash by issue of Cheque/DD. GENERAL OUTLINES OF THE SYSTEM OF DEFENCE SERVICES ACCOUNTS 22(a) All receipts realised by the Defence Services are paid into a treasury or Bank in lump sum and are accounted for at the Treasury or the Bank merely as receipts on behalf of Defence Services. The initial detailed accounts of such receipts are kept by the officers concerned of Defence Services. (b) All payments on behalf of Defence Services are made either at a treasury or the Bank by means of cheques or through e-mode /SBI-CMP by officers of the Defence Accounts Department and in certain cases by the Officers of Defence Services. The payments are treated by the Treasury / Bank merely as payment on behalf of Defence Services and the initial detailed accounts of the payments are maintained by the officers drawing the money by cheques, etc. Note: Except in some specific cases, where Defence Services Officers are allowed cash assignments on treasuries or the Bank all payments are made by cheques, etc. drawn by officers of the Defence Accounts Department. (c) The Officers of Defence Services referred to in clause (a) and (b) above, render the accounts of their transactions to the Pr. Controllers/Controllers concerned. These accounts, the receipts and payments by the Defence Accounts Department itself, the transactions relating to Border Roads, JAKLIi (Police ) and Coast Guard Organisations and the transactions passed on for adjustment by other Accounts Officers are classified by the Pr. Controllers/ Controllers of Defence Accounts under the appropriate classification heads of accounts. The lists of classification heads are given in the "Classification Hand Book of Defence Services Receipts and Charges” and “Pamphlet of Revenue, Debt and Remittance Heads". The transactions compiled by the Pr. Controllers/Controllers are, for purposes of compilation by computerised process, actually shown by them in code numbers instead of by classification heads. The detailed procedure for the compilation of the accounts by computerized process is given in Chapter 10. 12 (d) The All-India Consolidated Compilations for Defence Services Receipts and Charges (under Revenue, Debt and Remittance Heads as well as under Service Heads) are prepared by the EDP Section of CGDA Delhi Cantt. MODE OF SETTLEMENT OF DEFENCE TRANSACTIONS 23(a) All transactions arising in the Defence books which are eventually adjustable against the balances of the Railways and Department of Posts, Department of Supply or vice versa, are passed on to Accounts Officers concerned through "Settlement Accounts" and monetary settlement between the balances concerned in respect of such transactions is effected by the Pr. Controller/Controller/Accounts Officer in whose books the transactions originate through the Central Accounts Section of the Reserve Bank of India. (b) Transactions as specified in Chapter 8 arising in the books of one Pr. Controller/Controller which are adjustable in the books of another Pr. Controller/Controller of Defence Accounts are passed on through the Defence Exchange Accounts. (c) Transactions between Defence Services and other Ministries of the Central Government and Union Territories for which the Audit and Accounts have been separated i.e., the accounts for which are maintained by the Ministries/U.T themselves through their own Pay and Accounts Offices are settled on cash basis by issue of cheques. Note:- In certain cases, budget is placed by the Ministry of Defence to the Civil Ministry for direct booking of transaction (e.g. DAVP). An expenditure report is watched. (d) Transactions between Defence Services and non-government bodies and institutions or individuals are settled by actual payment or by actual recovery as the case may be. (e) The receipts and expenditure relating to Border Roads Organisation are finally accounted to the heads of the Ministry of Road Transport & Highways by the Defence Accounts Department - Pr. CDA (Border Roads) - although the Budget provisions are made by the Ministry of Road Transport & Highways. Monthly expenditure figures as well as final expenditure figures are intimated to the Pr Chief Controller of Accounts, MORT&H by Pr. CDA (Border Roads) to enable them to monitor the expenditure and to prepare Appropriation Accounts accordingly. (f) Similarly, the receipts and expenditure pertaining to Coast Guard Organisation are accounted for by Defence Accounts Department to the final heads of Ministry of Finance (CBEC). From the year 2002-03 onwards the budgetary requirements of Coast Guard Organization have been transferred from the Grants of the Ministry of Finance to Ministry of Defence (Civil Estimates). Appropriation Accounts of Ministry of Defence (Civil) reflecting the annual figures of receipts and expenditure of Coast Guard Organisation, including that of JAKLI, AFT, DGDE and DAD are prepared by CGDA. (g) Transactions of the Defence Services arising in the United Kingdom which are adjustable in India are passed on to India through the Inward London Account and dealt with centrally by PCDA New Delhi. Certain transactions on behalf of Government of India arising in England are finally audited in that country. Such transactions are advised to India through an account known as "Account of Receipts/Disbursements of the High Commissioner for India in the United Kingdom on account of the Government of India." Similarly, all Embassies transactions are advised to India by Pr. CCE (MEA), through settlement Account. The Defence transactions included therein are received and adjusted 13 centrally by the Pr. Controller of Defence Accounts New Delhi. The Remittance Transactions such as recovery of loans and advances, recovery of GPF subscription etc relating to other PCsDA/CsDA, will however be passed on by PCDA, New Delhi to the respective PCsDA/CsDA through the Defence Exchange Account. The detailed procedure in regard to the manner of adjustment of transactions between England and India is described in Chapter 9. (h) The monthly account of each Pr. Controller/Controller, thus includes not only receipts and disbursements arising in his accounts circle, but also receipts and charges in the United Kingdom, Washington and other Embassies and all credits and debits received by them from the PCDA, New Delhi through Exchange Accounts. CENTRAL JOURNAL AND LEDGER 24. The Controller General of Accounts maintains a Journal and Ledger for central transactions which is posted from the financial accounts of each year received from all Accounts Offices in India. STATEMENT OF CENTRAL TRANSACTIONS (SCT) OF DEFENCE SERVICES RECEIPTS AND CHARGES 25(a) The Controller General of Defence Accounts, prepares SCT of Defence Services & and Ministry of Defence (Civil)- Receipts and Charges annually each year. These SCTs are rendered to the Controller General of Accounts, Ministry of Finance, Department of Expenditure, New Delhi on the date prescribed by them. A copy of the Statement of Central Transactions is also endorsed to the Director General of Audit Defence Services, who after check, endorses his audit certificate thereon and passes it on to the Controller General of Accounts. A copy of the consolidated annual accounts is also sent to the DGA (Central Revenues), New Delhi by the DGA, DS after audit. (b) The SCT is prepared from the material available in the All India Consolidated Compilation of Service Heads Revenue Debt and Remittance Heads for March Supplementary (including Corrections thereto, if any). A copy of the same will also be forwarded by the Controller General of Defence Accounts to the Ministry of Defence (Fin). (c) After closing of annual accounts, if an amendment to SCT is effected through Journal Entries with the approval of CGA, Ministry of Finance (Department of Expenditure), New Delhi, the effect of the Journal Entries will be intimated by the Accounts and Budget Section of the CGDA, Delhi Cantt to the PCsDA/CsDA concerned to enable them to update their ledger balances and balances reflected in the Annual Review of Balances, if any. Audit certificate of the Pr DADS/DADS will also be obtained for the effect of Journal Entries in Annual Review of Balances”. Note: - ‘Statement of Central Transactions’ at the end of every financial year represents progressive effect of all the transactions during the year. The SCT is prepared only for minor head-wise details under different major heads concerned, showing charged, voted, plan and non-plan expenditures distinctly. 14  ANNUAL FINANCE ACCOUNTS OF THE CENTRAL GOVERNMENT 26. The Annual Finance Accounts of the Central Govt. (including Defence Services) are prepared by the Controller General of Accounts after the close of each financial year. While the Appropriation Accounts of Defence Services are prepared by the Financial Adviser (Defence Services) and signed by the Defence Secretary, the Appropriation Accounts of the Defence (Civil) and Defence Pensions are prepared by the CGDA Office and signed by the CGDA. Note:-Finance Accounts contains various statements. Some of the important Statements are:- (i) Statement No.1- Summary of Transactions (ii) Statement No.3-Loans and Advances by the Union Government (iii) Statement No.4- Guarantees Given by the Union Governments (iv) Statement No. 5-Summary of Balances (v) Statement No.6-Statement showing Percentage Distribution of Revenue Receipts and Revenue Expenditure for the year (vi) Statement No.-10 Statement of Expenditure on Capital Account during and to the end of the year (vii) Statement No.-11-Statement showing the Investments of the Union Government in Statutory Corporations, Government Companies, Other Joint Stock Companies, Co- operative Banks and Societies, etc., up to end of the year (viii) Statement No.-13-Statement of Receipts, Disbursements and Balances under heads of account relating to Debt, Deposits, Remittances and Contingency THE COMBINED FINANCE AND REVENUE ACCOUNTS OF THE CENTRAL AND STATE GOVERNMENTS IN INDIA 27. The Controller General of Defence Accounts (CGDA) prepares the portion of the Combined Finance end Revenue Accounts pertaining to the Defence Services and submits it to the Controller General of Accounts (CGA) for incorporation in the Combined Finance and Revenue Accounts of the Central and State Governments in India. This account is in the nature of a General Financial Statement incorporating a summary of the accounts of the Central Government and of all the State Governments for the last preceding financial year. It presents the transactions of all the Governments side by side, classified under the several major and minor heads of accounts classification, thus incidentally enabling a comparison to be made for statistical or other purposes of the receipts and expenditure of the several Governments pertaining to each branch of administration or to activities of a similar nature. 28. Blank 15  CHAPTER 3 GENERAL PRINCIPLES AND METHODS OF ACCOUNTS GENERAL Period of Accounts 29. The annual accounts of the Central, State and Union Territory Governments which the Controller General of Accounts is required to render, shall record transactions which take place during a Financial Year running from 1st April to 31st March. Similarly, the Annual General Financial Statement (the Combined Finance and Revenue Accounts of the Central and State Governments in India) which the Controller General of Accounts prepares, shall record the transactions of the Central/State and Union Territories Governments for the same period. Note:- The Government accounts of a year are kept open for a certain period in the following year for completion of the various accounting processes interalia in respect of the transactions of March, for carrying out certain inter-departmental adjustments, through the Central Accounts Section of the Reserve Bank of India, Nagpur upto 15th April of the following year, vide Para 108 and for the closing of the accounts of several Provident Funds and Suspense heads. Adjustments may also be made after the close of the year in respect of misposting and misclassifications coming to notice after the 31st March. An actual transaction taking place after 31st March should not, however, be treated as pertaining to the previous financial year even though the accounts for that year may be open for the purposes mentioned above Accounts so kept open after 31st March are known as March Supplementary/Supplementary-I and March Supplementary Corrections/ Supplementary-II. These accounts are closed by the CGDA on the dates intimated by CGA, Ministry of Finance (Department of Expenditure). The dates of closing of accounts in the books of PCsDA /CsDA are intimated by the CGDA each year. The accounts of the financial year in the books of the PCsDA/CsDA will be finally closed in March Supplementary Corrections/ Supplementary-II. However, a 3 to 4 days time window for reporting any exceptional manual corrections shall be provided before finalizing of March Supplementary Corrections/Supplementary-II. After closing of annual accounts, if a rectification/readjustment is necessary, the same will be carried out with the prior approval of CGA, Ministry of Finance (Department of Expenditure) in exceptional cases subject to the following:- (i) Journal Entry is initiated for rectification of a misclassification / readjustment within the time limit prescribed by the CGA; (ii) The rectification / readjustment necessitated is not less than one Crore of amount in a single transaction unless rectification/ readjustment is otherwise necessary for closing of annual accounts. (iii) Suitable action is invariably taken against all concerned for not detecting the error during monthly review and within the supplementary accounts. 16 Cash basis of Accounts 30. With the exception of such book adjustments as may be authorized by any rules included in this Code or Account Codes or by any general or special orders issued by Government, after consultation with the Comptroller and Auditor General, the transactions in Government Accounts shall represent the actual cash receipts and disbursements during a financial year as distinguished from amounts due to or by the Government during the same period. Currency in which Accounts are kept 31. The Accounts of Government kept in India are maintained in Indian Currency. FORMS OF ACCOUNTS Main Divisions of Accounts 32. The Accounts of Central Government shall be kept in the following three parts: (i) Part I - Consolidated Fund of India (ii) Part II - Contingency Fund of India (iii) Part III - Public Account of India (1) In Part I (Consolidated Fund of India) of the Account there shall be two main divisions namely: — (i) Revenue (consisting of sections for “Receipt Heads (Revenue Account)” and “Expenditure Heads (Revenue Account)”. (ii) Capital, Public Debt, Loans etc. (consisting of Sections for “Receipt Heads (Capital Account)” and “Expenditure Heads (Capital Account)” and “Public Debt (Loans and Advances etc.)”. (a) The first division comprising of the Section “Receipt Heads (Revenue Account)” shall deal with the proceeds of taxation and other receipts classed as revenue, and the Section “Expenditure Heads (Revenue Account)” dealing with expenditure met therefrom. (b) The section “Receipt Heads (Capital Account)” in the second division shall deal with receipts of a Capital nature which cannot be applied as a set off to Capital Expenditure. (c) The section “Expenditure Heads (Capital Account)” in the second division shall deal with expenditure met usually from borrowed funds with the object either of increasing concrete assets of a material and permanent character or of reducing recurring liabilities. It also includes receipts of a capital nature intended to be applied as set off to Capital Expenditure. (d) The section “Public Debt” and “Loans and Advances” etc. of the Second Division shall comprise Loans raised and their repayments by Government such as “Internal Debt”, “External Debt” of the Central Govt. and Loans and Advances made (and their recoveries) by Governments. The Section also includes certain special types of heads for transactions relating to 'Transfers from Consolidated Fund to the Contingency Fund' and inter-state settlement. 17 (e) So far as the Defence Services and Defence Accounts Department are concerned, the following sections are covered in Part I of Pamphlet of Revenue, Debt and Remittance Heads and Classification Hand Book of Defence Services Receipts and Charges:- (i) Revenue Division-Sectors 'A' and 'B’ (ii) Capital Division—Sectors 'A', ‘B’ and 'C’ (iii) Loans and Advances-Sector ‘F’ (2) In Part II (Contingency Fund of India) of the Account the transactions connected with the Contingency Fund set up by the Government of India under Article 267 of the Constitution shall be recorded. Detailed instructions in this connection are contained in Chapter 17. (3) In Part III (Public Account of India) of the Accounts, the transactions relating to Debt { i.e. Small Saving Provident Funds (Sector-I), Reserve Funds (Sector-J) Deposits and Advances (Sector-K)}, Suspense and Miscellaneous (Sector-L) and Remittances (Sector-M)} shall be recorded. The transactions under Debt, Deposits and Advances in this Part are such in respect of which Government incurs a liability to repay the moneys received or has a claim to recover the amounts paid together with the repayments of the former (Debt and Deposits) and the recoveries of the latter (Advances). The transactions relating to 'Remittances' shall embrace adjusting heads with Railways and Department of Posts etc., except Exchange Accounts which are settled within different accounting circles (TBOs etc). The initial debits or credits to these heads will be cleared eventually by corresponding receipts or payments either within the same circle of account or in another account circle. 'Suspense' in this Part is also a adjusting head. So far as Defence Services and Defence Accounts Department are concerned, Part III of the account will cover all Sectors from ‘I to M’. 33(a) The Divisions/Sections mentioned in the preceding paragraphs shall be grouped into sectors under which specific functions or services are grouped. The sectors are sub-divided into Major Heads of Account. However, in some cases, the sectors are, sub-divided into sub- sectors before been divided into Major Heads of Accounts. The sectors shall be distinguished by a series of letters of the Alphabet separately for the "Revenue Receipt" section, the "Revenue Expenditure" section and for the sectors included in the remaining Sec- tions/Divisions. (b) A four digit code has been allotted to the Major Head, the first digit indicating whether the Major Head is a Receipt Head or a Revenue Expenditure head or a Capital Expenditure head or Loan Head. If the first digit is '0' or '1' the head of Account will represent Revenue Receipt, '2' or '3' will represent Revenue Expenditure, '4' or '5' Capital Expenditure, '6' or 7' Loan Head and '8' will represent Contingency Fund and Public Account. (c) Under the scheme of codification, the "Receipt" Major Heads are assigned the block of consecutive serial numbers 0001 to 1999 and "Expenditure" Major Heads on Revenue Account from 2001 to 3999. The only Capital Receipt Major Head has been given the code number 4000. Expenditure Major Heads on Capital Account are assigned code Nos. from 4001 to 5999 while Major heads under 'Public Debt' Loans and Advances, Inter-state Settlement and Transfer to Contingency Fund are assigned code Nos. from 6001 to 7999. The only Head for Contingency Fund in Part II Contingency Fund is given the code number 8000. The Major Heads in the Public Account are assigned code numbers from 8001 to 8999. The code numbers relating to a Major Head in respect of the same function falling under the four sections mentioned above are arranged in such a way that by adding 2000 to 18 the concerned code, the Major Head applicable for the four sections could be determined. This is to ensure easy correlation of Receipts/Expenditure relating to the same function occurring in these four sections. Illustration Receipt Major Expenditure Capital Major Head Loan Major Head Head (Revenue Major Head Account) (Revenue Account) 1 2 3 4 Civil Heads : 2075 Miscellaneous 4075 Capital Outlay 6075 for Loans 0075 Miscellaneous General Services on Miscellaneous Miscellaneous General General Services General Services Services Defence Head : 2076 Defence Serv- 4076 Capital Outlay 0076 Defence ices, Army on Defence - Services, Army Services Civil Heads : 2210 Medical & 4210 Capital outlay 6210 Loans for 0210 Medical & Public Health on Medical & Public Medical & Public Public Health Health Health 0435 Other 2435 Other 4435 Capital Outlay 6435 Loans for Agricultural Agricultural on other Agricultural Programmes Programmes Agricultural Programmes Programmes 1054 Roads and 3054 Roads and 5054 Capital Bridges Bridges Outlay on Roads - and Bridges Note: The Major Head Capital Outlay on Defence Services is a common head which caters to all Defence Services including Army, Navy, Air Force, Ordnance Factories, R & D and Inspection Organisation. There is no corresponding loan Major Head for Army. (d) As exceptions to these General principles of assigning code numbers there are a few cases of Major Heads for the same function which do not exist in all the four sections. In other words, the Major Heads of the same description would appear only in the relevant Sections. The various sections/sectors/sub-sectors classified under the different divisions relating to Defence shall be as given in Appendix I. (e) The Sub Major Heads are denoted by two digits (e.g. 02, 03, etc.). The Minor Heads are given three digits as in 101, 104, 110, 800 etc. Some of the Minor Heads (see examples given below) are common to some of the Services/Ministries. Minor Head 001—Direction and Administration Minor Head 004—Research and Development Minor Head 050 —Lands and Buildings Minor Head 051 —Construction Minor Head 052 - Machinery and Equipment Minor Head 202 —Construction Minor Head 790-Loans to PSUs 19  Minor Head 799-Suspense Minor Head 800-Other Expenditure Major, Minor Detailed and Object Heads 34(a) (i) The main unit of classification in accounts is Major Heads. Major Heads are divided into Sub-Major Heads wherever necessary, which shall be divided into Minor Heads each of which shall have a number of subordinate heads generally known as Sub-Heads. The Sub-Heads are further divided into 'Detailed Heads' followed by Object Heads. Object Head represents the primary unit of appropriation. (ii) Major Heads, Sub Major Heads, Minor Heads, Sub-Heads, Detailed Heads and Object Heads together constitute six tier arrangement of the classification structure of Government Account. Six tiers are represented by a unique 15 digit numeric code. The Civil grants of the Ministry of Defence are classified in this manner. (b) On the expenditure side of the accounts, particularly in respect of head of Accounts within the Consolidated Fund, the Object Heads are primarily meant for itemised control over expenditure and indicate the nature of expenditure on a scheme or activity or organisation such as 'Salaries', 'Office expenses', 'Loans', etc. They also constitute the primary unit of Appropriation for the purpose of Demand for Grants of Governments. A list of standard Detailed Heads comprising the common items of expenditure in the activities of Government which can be uniformly adopted is given in Appendix II. Classification in the books of Ministry of Defence 35(a) The grants of the Services are classified upto Detailed Head in which the Major Heads, Sub Major Heads, Minor Heads, Sub-Heads and Detailed Heads constitute a five tier arrangement. In case of Defence Services, a Detailed Head constitutes the fifth and last tier of classification of expenditure. The detailed head in CHB is termed as an Object of classification. (b) The detailed classification of account heads used in Government Accounts upto the stage of minor heads is given in the List of Major and Minor Heads of Account of Union and States-Published by the Controller General of Accounts, Department of Expenditure, Ministry of Finance. The heads of classification operated upon in the Defence Services accounts are shown in Classification Hand Book of Defence Services-Receipts and Charges and Pamphlet of Revenue, Debt and Remittance Heads. (c) ‘Classification Hand Book of Defence Services-Receipts and Charges’ is a compilation of code heads of Revenue and Capital Heads pertaining to Defence Service Estimates only. Classification codes in the ‘Classification Hand Book of Defence Services-Receipts and Charges’ are alpha-numeric. The classification at the Sub-Head level is given in alphabets. (d) The Pamphlet of RD&R contains 15 digits numeric classification heads of receipts and expenditure of Revenue and Capital in respect of Civil departments paid out of Civil grant of the Ministry of Defence. In addition, the Debt, Loans and Advances, State Provident Funds, Reserve Funds, Deposits and Advances, Suspense and Remittance heads are opened only in the Pamphlet of RD&R which are operated both for Defence Service transactions and Civil transactions. (e) The Debt, Loans and Advances, State Provident Funds, Reserve Funds, Deposits and Advances, Suspense and Remittance heads close to the balance to the Government after 20 closing of Government Account and balances thereof are carried forward in the Annual Review of Balances. (f) Both the books are published by the Controller General of Defence Accounts. Objectives of Classification 36. The existing codification of accounting, receipts/expenditure heads represents:- (i) Major Head- 4 digits (Function) (ii) Sub-Major Head- 2 digits (Sub-function) (iii) Minor Head- 3 digits (Programme) (iv) Sub-Head- 2 digits (Scheme) (v) Detailed Head- 2 digits (Sub-Scheme) (vi) Object Head- 2 digits (primary unit of appropriation) Note: -Detailed Heads and Object Heads of Pamphlet of RD&R are represented by seven digits in the CHB and Pamphlet of RD&R. This codification is converted into 15 digits in the CGA’s account, through a concordance. The Major Heads of account falling within the sector and sections in the Consolidated Fund generally correspond to functions of Governments- such as the different services like 'Defence', etc., provided by Government while the Minor Heads subordinate to them identify the programmes undertaken to achieve the objective of the function represented by the Major Head. 'Special Projects', 'Renewals and Replacements' and 'Works' are some of the programmes under Defence for which minor heads have been opened. A programme may consist of a number of schemes or schedules or activities and these generally correspond to 'Sub-Heads' (the fourth tier of the classification) below the Minor Head represented by the programme. Examples of activities under Minor Head 'Works' under Defence are 'Major Works', 'Minor Works', 'Special Repairs' etc. In Classification Hand Book of Receipt and Charges these schemes are identified by different heads as sub-Scheme known as detailed heads. Similarly, in respect of civil grants for example in the case of Housing Functions under the Central Government (Major Head 2216), Maintenance (Minor Head 053) is a programme. Under this programme Repairs and Maintenance of residential buildings is a scheme (Sub-Head 01) in which DAD (detailed Head 05) carries out Minor Works (Object Head 27) in respect of different DAD residential buildings. Guidelines for opening a new code 37. CGDA has been delegated powers to open the sub and detailed heads below the Minor Heads to meet local and special requirements subject to the stipulation that sub and detailed heads relating to revenue etc. pertaining to Civil Ministries and expenditure debitable to heads in the Composite Demand for Grants etc., should correspond to those authorised for the purpose or appearing in the Composite Demands for Grants. These powers would be exercisable by the CGDA with the concurrence of Ministry of Defence (Finance) in consultation with the accredited Audit Officer (DGADS). In determining the sub- heads the following guiding principles should be observed:- (i) Homogeneous schemes under a programme especially those involving small outlays, should be grouped into suitable Sub Heads. (ii) The Sub-Heads should not be multiplied unnecessarily. New ones are to be opened 21 only when necessary. (iii) In certain cases the grounds for opening specific Sub-Heads below the Minor Heads have been indicated in the 'General Directions’ to the 'List of Major and Minor Heads of Account' and in the various Notes below the Major Heads in that list. These directions should be followed wherever necessary. (iv) A Sub-Head or detailed Head which is placed under a particular Minor Head by the Controller General of Accounts either through directions in the List of Major and Minor Heads or elsewhere should not be placed under another Minor Head. (v) The Sub-Heads subordinate to a Minor Head of Expenditure should be so arranged in accounts as to exhibit separately the expenditure under each unit of appropriation prescribed from time to time by Government. (vi) The Object Heads shown in Appendix-II to this chapter may be adopted and such additional heads as may be found necessary to cover the specific types of expenditure in certain departments, may also be opened. Care should, however, be taken to ensure that Object/Detailed Heads are not proliferated unnecessarily. The Object/Detailed Heads will be also be opened by the C.G.D.A. with the concurrence of Ministry of Defence (Finance) (Budget) and in consultation with DGADS. Note 1: In all accounts and records, the Major and Minor Heads shall be arranged in the exact order shown in the above publications. The prescribed classification should be followed strictly, exact uniformity being essential even in regard to nomenclature. Note 2: The classification of all Receipts and Charges will be noted on the accounts, schedules or vouchers received. Pamphlet of RD&R/Classification Hand Book of Defence Services Receipts and Charges 38. All amendments to the "Pamphlet of Revenue, Debt and Remittance Heads" and "Classification Hand Book of Defence Services Receipts and Charges" are issued by the Controller General of Defence Accounts under delegated powers with the concurrence or at the instance of the Ministry of Defence (Finance) in consultation with the accredited Audit Officer, namely, Director General of Audit, Defence Services. The prior approval of Comptroller and Auditor General will also be obtained (through CGA/DGADS) in cases where an amendment affects Major or Minor Head in Pamphlet of RD &R Heads and Classification Hand Book of Defence Services — Receipts and Charges. Note: The term “amendment" used in the above paragraph is intended to mean the introduction of a new head as also the deletion or change in nomenclature of any of the existing heads. Classification of Expenditure as “Charged” or “ Voted” 39. Expenditure which under the provision of the Constitution is subject to the Vote of the Legislature shall be shown in the annual accounts separately from expenditure which is "charged" on the Consolidated Fund of India. The expression "Charged" or "Voted" shall be appended to the heads concerned in the annual accounts to distinguish the two categories of expenditure (See also Para 292). 22  CLASSIFICATION OF TRANSACTIONS IN ACCOUNTS General Limitations 40. All rules of classification laid down in this Code are subject to the rules regarding inter-departmental transfers contained in Chapter 4 and to any other rules or orders which have been or may be issued to regulate adjustment between different Governments. General Principles of Classification 41. As a General Rule, the classifications of transactions in Government Accounts shall have closer reference to the function, programme and activity of the Government and the object of the Revenue or Expenditure rather than the Department in which the revenue or expenditure occurs. For example, expenditure incurred for Army Ordnance and Clothing Factories and the expenditure incurred by the Army for Air Force and Navy and vice versa are debitable to the Heads pertaining to the Factories or the Arm of Service for which the expenditure is incurred. This principle is, however, subject to such exceptions as may be authorised specially in any individual case or a class of cases, for example, receipts representing interest are shown under Major Head 0049-Interest Receipts irrespective of the formations to which they relate. Example: Expenditure on Engineer Services required for the Army is charged as Military Engineer Services Expenditure under the Army Head. Similar expenditure incurred for Ordnance Factories, the Air Force or the Navy is classified under the respective heads relating to the Ordnance Factories, the Air Force or the Navy. CLASSIFICATION OF CAPITAL AND REVENUE EXPENDITURE 42. Significant expenditure incurred with the object of acquiring tangible assets of a permanent nature (for use in the organisation and not for sale in the ordinary course of business) or enhancing the utility of existing assets, shall broadly be defined as Capital expenditure. Subsequent, charges on maintenance, repair, upkeep and working expenses, which are required to maintain the assets in a running order as also all other expenses incurred for the day to day running of the organisation, including establishment and administrative expenses, shall be classified as Revenue expenditure. Capital expenditure is generally met from receipts of capital nature, as distinguished from ordinary revenues derived from taxes, duties, fees, fines and similar items of current income including extraordinary receipts. It is open to the Government to meet capital expenditure from ordinary revenues, provided there are sufficient revenue resources to cover this liability. Expenditure of a capital nature, as defined above, shall not be classed as Capital expenditure in the Government Accounts unless the classification has been expressly authorised by general or special orders of Government. It is inherent in the definition of Capital Expenditure that the assets produced should belong to the authority incurring the expenditure. Expenditure on a temporary asset cannot ordinarily be considered as expenditure of a capital nature. 23 Criteria for determining whether expenditure should be classified under heads of Capital section or Revenue section of the Consolidated Fund of India 43(a) Expenditure of a capital nature to be classified in the Capital Section shall broadly be defined as expenditure incurred with the object of either increasing concrete assets of a material and permanent character. Note-1:- Expenditure on a temporary asset or expenditure on Grants-in-aid to local bodies or institutions cannot ordinarily be classifiable as capital expenditure, and shall not, except in cases specifically authorised by the President on the advice of Comptroller and Auditor General be debited to a capital head of account. Note-2:- Expenditure on Grants-in-Aid to local bodies or institutions for the purpose of creating capital assets will be classified separately under the capital Object Head ‘35’-Grants for creation of capital assets. (b) Expenditure of a Capital nature shall be distinguished from Revenue expenditure both in the Budget Estimates and in Government Accounts. Note- Capital expenditure is generally met from receipts of a capital, debt, deposit or banking character as distinguished from ordinary revenue derived fro