National Panchayat Accounting Manual

An Introduction

A thought…“The accounts of the government ought to be made as simple as those of the common farmer

and capable of being understood by common farmers.”

- Thomas Jefferson

Accounting StructureUses simple Three Tier Coding System i.e.

Major Head – 4 digits- Represents Functions

Minor Head - 3 digits- Represents Programme/Unit

Object Head- 2 digits- Represents Object item

• Separate 2 digits sub heads have been prescribed for Central Schemes.

Accounting StructureS.No.

Function Major Head Minor Head

Description

. Receipt Revenue Exp

Capital Exp

1. Minor Irrigation

0702 2702 4702 101 Distt. Panchayat Programm.

2.Example to book expenditure central Scheme NRHM

Major Head 2210 –Health Minor Head 101 – Public Health Centre Sub Head – 15 – NRHM Scheme Head Object Head – 02- Wages Accounting Head 2210101-15-02

Basis of Accounting and Accounting Systems

Double Entry

Double Entry

Single Entry

Single Entry

Cash BasisCash Basis

Accrual Basis

Accrual Basis

Proposed Accounting SystemThe Model Accounting System prescribes ‘Cash

Based Accounting’.

During the various discussions held with stakeholders, there is a general consensus that the accounts should be prepared under Double Entry Accounting system on Cash Basis.

Therefore it has been decided that accounts of PRIs will be maintained on ‘Cash Basis’ under ‘Double Entry System.’

Introduction to DEASDouble entry accounting system recognizes that

every transaction has a dual affect. There are two sides of every transaction. If one account is debited, any other account must be credited. Every transaction affects at least two accounts in opposite directions. It may, however be noted, that the double entry does not mean that a transaction is recorded twice, but it means that at least two accounts are affected.

Introduction to DEASIf PRI purchases a water pipe then its:-

Bank Account gets reduced.

and

Assets / stores have been increased

Golden Rules of Debit/Credit

S.No. Categories of

Accounts

Example Rules of debit and credit

Debit Credit

I Personal

account

Persons and institutions

Receiver of benefit

Giver of benefit

II Real account Goods, assets including cash

What

comes in

What goes

out

III Nominal

account

Items relating to services i.e salary, wages, rent trade tax etc.

Expenses /

Losses

Income /

Gains

Accounting Records & Formats for DEAS

The Model Accounting System prescribes 8 formats for maintaining and reporting accounts of the PRIs.

Additional books and formats for recording and maintaining basic accounting entries recommended.

Under the Double Entry Cash-based accounting PRI shall be required to maintain some Primary/Original Books of Accounts

Formats under Model Accounting System

Receipt & Payment Account

Consolidated Abstract Register

Reconciliation Register

Statement of Receivable and Payables

Register of Immovable Property

Register of Movable property

Inventory Register

Register of Demand, Collection of Balance.

Additional Basic Accounting Books & Formats

Cash Book PRI 1

Journal Book PRI 2

Ledgers PRI 3

Receipt Voucher PRI 4

Payment Voucher PRI 5

Contra Voucher PRI 6

Journal Voucher PRI 7

Receipt PaymentDeposit /

Withdrawal Adjustments

Receipt Voucher

PaymentVoucher

ContraVoucher

CASH BOOK

GENERAL LEDGER

TRIAL BALANCE

RECEIPTS & PAYMENT ACCOUNT

BALANCE SHEET

JOURNAL VOUCHER

JOURNAL

DOUBLE ENTRY CASH BASED ACCOUNTING

INCOME & EXPEND. ACCOUNT

Implementation Through ‘Priasoft’The End User will only enter any of the following

vouchers:

Receipt Voucher ( For any money received by PRI

Payment Voucher (For any money paid by PRI)

Journal Voucher (For making adjustment)

Contra Voucher( For withdrawing/depositing cash in Bank)

Receipt Vouchers Receipt Vouchers will be passed for following transactions:

Any money received on account of income from own sources

Funds received as Grants from Central/State/other sources directly or through Transfers from other PRIs

Funds received as Advance/Earnest Money/Deposit

Funds received on account of recovery of advance given.

Cancellation of Stale Cheques( not enchased)

Recovery of overpayment if any.

Payment Vouchers Payment Vouchers will be passed for following transactions Payments made for Revenue like Salary, Telephone Bills,

Electricity Bills etc. Payments made for Capital Expenditure like Construction

of Buildings & Infrastructure, Purchase of Vehicles & Machinery etc.

Transfer of Funds to other PRIs. Advances given to Employees/contractors/other PRIs Repayment of Advances/Loans and Interest Refund of revenue. Correction in wrong booking of Receipt if separate bank

accounts are in operation..

Journal VoucherJournal Voucher are adjustment vouchers and

will be passed for non cash transactions like: Correction in source of receipt when the

accounts of both the sources are in same Bank Correction in Payment transactions when

accounts of both the Payers are in same Bank. Deductions from Payments to be paid to

respective authorities later on.

Contra VouchersContra Vouchers will be entered for followinng

transactions: Withdrawing cash from the Bank for making

payments in cash. Depositing funds in the Bank received in Cash

on accounting of revenue income or EM etc. It may be noted that Contra Voucher shall not be

used for transferring funds from one Bank account to another Bank Accounts related to separate schemes.

Vouchers to be Passed for different Transactions

Nature of Payment Voucher to be Passed

Cash withdrawn from bank

Property tax received

Recovery of Advance (Cash/Cheque)

Stale Cheques (issued but not encashed)

Grants received form Central/State/Others

Salary paid to Gopal

Advance given to contractor/employee

Transfer of Funds to other PRI

Correction in Source of Grant (Same Bank A/c)

Correction in Source of Grant (Separate Bank

A/cs)

Cash deposited in bank

Vouchers to be Passed for different Transactions

Nature of Payment Voucher to be Passed

Cash withdrawn from bank Contra

Property tax received Receipt

Recovery of Advance (Cash/Cheque) Receipt

Stale Cheques (issued but not encashed) Receipt

Grants received form Central/State/Others Receipt

Salary paid to Gopal Payment

Advance given to contractor/employee Payment

Transfer of Funds to other PRI Payment

Correction in Source of Grant (Same Bank A/c) Journal

Correction in Source of Grant (Separate Bank

A/cs)

Payment /Wrong SourceReceipt correct/Source

Cash deposited in bank Contra

Reconciliation Procedurea. Bank Reconciliation

b. Reconciliation of Deposits

c. Reconciliation of receivables & collections

d. Reconciliation of Advances

e. Reconciliation of Loans

f. Reconciliation of Payables (contractor’s)

g. Reconciliation of balances with Government and other agencies.

h. Reconciliation of Ledgers with Subsidiary Ledgers

Bank Reconciliation Need of Bank Reconciliation Statement

Pin pointing mistakes in the Bank Book maintained by the PRI and Pass Book of the concerned Bank.

Identifying delay in the clearance of cheques / remittances

Checking on embezzlement

Checking the accuracy of Bank Book.

Accounting for Bank charges levied by the Bank and Credit of interest given by Bank.

Bank Reconciliation Causes Responsible for the Difference Between the

Balances of Bank Book and Pass book. Cheques issued by PRIs but not yet presented for payment. Cheques deposited into the bank but not yet collected by the

bank. Cheques directly deposited by the customers in PRIs account in

the bank. Interest credited by the bank but not recorded in the Bank Book. Interest, bank charges charged by the bank but not recorded in

the Bank Book. Dishonored cheques not recorded in the Bank Book. Cheques received and entered in the Bank Book but omitted to

be banked.

Bank Reconciliation Steps for Preparation of Bank Reconciliation Statement. PRIs may prepare the Bank Reconciliation Statement on monthly basis and

should be completed by end of the first week of the next month. Bank reconciliation statement includes the following steps.

Firstly tick-out the transactions appearing in both Bank Book and Pass Book / Bank Statement of the relevant month.

Secondly list out the transactions of Bank Book and Pass Book which are not ticked-out. Separate list of each of the following is to be prepared. Un-ticked items of receipt side of the Bank Book. Un-ticked items of payment side of the Bank Book. Un-ticked items of deposit column of Pass Book / Bank statement. Un-ticked items of withdrawal column of Pass Book / Bank statement.

Bank Reconciliation statement shall be prepared separately for each Bank

Bank ReconciliationS.No. Items Amount (Rs.)

Plus (+) Minus (-)

1. Balance as per Bank Book √2. Cheque issued by ULB but not presented

for payment √

3. Cheque deposited into bank but not yet collected

√

4. Cheque directly deposited by the customers in ULBs bank account.

√

5. Interest credited by the bank but not recorded in bank book

√

6. Interest / Bank charges / Collection charges debited by the bank but not recorded in the Bank Book

√

7. Dishonored cheques not recorded in the Bank Book

√

8. Cheques received and entered in Bank Book but omitted to be banked

√

Total √ √Balance as per bank statement / Pass Book (Difference of plus and minus)

√ √

Grand Total

Reconciliation of DepositsFor reconciliation of Deposits, PRIs will prepare

following Statement :

Sr. No. Particulars Amount (Rs.)1. Balance of deposits in

the beginning of accounting period.

2. Add – Deposits received during the year.

3. Less – Refund of deposits during the year.

4. Less – Deposits adjusted during the year.

5. Balance of deposit at the end of accounting period.

Reconciliation of Receivables and

CollectionsReceivables and collections shall be reconciled on

yearly basis or other shorter time intervals as PRI may decide.

Receivable on account of taxes, fees and rent should be derived from the respective DCB register.

The Reconciliation Statement shall be reconciled with the respective ledger accounts maintained by the PRI. The reasons for differences, if any, shall be identified and rectification entries passed in the department which has recorded the entry incorrectly

Reconciliation of Advances Reconciliation of advance given to

Contractors/Suppliers

The PRI shall maintain a record of the advances given to each of the contractors/suppliers.

The PRI who has given advance to the contractor/supplier shall prepare a Reconciliation Statement of Advance Outstanding in the format provided in Table below for all the contractors/suppliers. In case there is a discrepancy between the records this statement may have to be prepared for each contractor/supplier.

Following Table can be used for Reconciliation of Advances given:

Reconciliation of AdvancesParticulars Amount (Rs.)

Advance outstanding at the beginning of the

accounting year

Add: Further advance given during the

current accounting year (specify all the

Payment Orders through which advance have

been provided)

Total Advance Provided

Less: Advance recovered during the current

accounting year (specify all the Statement of

Collection through which advance had been

recovered)

Less : Advance Adjusted (Give details)

Advance outstanding at the end of the

accounting period

Reconciliation of AdvancesFor reconciliation of advances given to employees, following Table can be used:

Particulars Amount (Rs.)

Advance outstanding at the beginning of

the accounting year

Add: Further advance given during the

current accounting year (specify all the

Payment Orders through which advance

have been provided/replenished)

Total Advance Provided

Less: Advance recovered including

recovery from the salary during the

current accounting year

Advance outstanding at the end of

the accounting period

Reconciliation of LoansThe PRI shall maintain a record of all the loans

borrowed in Register of Loan (Form PRI- 29). At the end of each accounting year, the PRI shall prepare and forward to the lender, a Confirmation Statement for loan borrowed in the format provided in Table below stating therein, the amount borrowed or disbursed directly to Executing Agency, the amount repaid and interest accrued and paid on the loan

Reconciliation of LoanParticulars Amount

(Rs.)

Amount

(Rs.)Loan outstanding at the beginning of the

accounting year

Add: Instalments received during the accounting

year

Sub-total loan outstanding

Less: Instalments paid during the accounting year

Net Loan outstanding at the end of the

accounting year (A)

Total Interest Payable at the beginning of

the accounting year

Add: Interest accrued during the accounting year

Total Interest Payable

Less: Interest paid during the accounting year

Total Interest Payable at the end of the

accounting year (B)

Total amount due (principal plus interest) at

the end of the accounting year (A+B)

Reconciliation of PayablesSr.

No. Particulars Amount (Rs.) Amount (Rs.)

A OPENING BALANCE OF UNPAID BILLS

i. Bill outstanding in respect of the previous accounting year

ii. Bill outstanding in respect of years prior to previous

accounting year (This detail should be given year-wise,

wherever applicable)

B Add: Bills received during the current period

C GROSS TOTAL LIABILITY OUTSTANDING (A + B)

D PAYMENTS DURING THE CURRENT PERIOD

i. Payment of bills pertaining to the current accounting year

ii. Payment of bills pertaining to previous year accounting year

during the current period

iii. Payment of bills pertaining to prior to the previous accounting

years during the current period (This detail should be given

year-wise, wherever applicable)

E Total payments during the current period (i + ii + iii)

F CLOSING BALANCE OF UNPAID BILLS

i. Bill outstanding in respect of the current accounting year [B –

D(i)]

ii. Bill outstanding in respect of the previous accounting year

[A(i) – D(ii)]

iii. Bill outstanding in respect of years prior to the previous

accounting year (This detail should be given year-wise,

wherever applicable) [A(ii) – D(iii)]

Reconciliation of Balances with the Government and Other

Agencies Since PRIs are implementing various Central /State government

schemes it becomes imperative to reconcile the balances between the books of account of the PRI and the government/agencies.

At the end of each accounting year, the PRI shall prepare and forward to the concerned authority/agency within 15 days from the end of the accounting year, a Confirmation Statement stating therein

the amount receivable from the authority/agency.

the amount payable to the authority/agency .

depending on whether sum is receivable from or payable to the authority/agency.

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