The Union Government has accepted in-principle to gradually move towards accrual basis of accounting. This was stated by Shri V N Kaila, Controller General of Accounts, Ministry of Finance, while addressing a Conference organized to mark the 60th year of the Institute of Chartered Accountants of India, here today. He said that there are definite benefits of accrual accounting that cannot be ignored. The decision makers can know the full cost of services they are providing, and this would result in better resource allocation, better management of assets and liabilities. Overall, it would create a desirable measure of the complete financial health of the Government, Shri Kaila added.

Speaking about the issues involved in transitioning to the accrual system of accounting, Shri Kaila said that there are various factors that have created a demand for a transition to accrual system of accounting, such as the changing information needs of the decision makers, the implications of the FRBM Act, outcome oriented budgeting, etc. Stating that the Government at present follows the cash basis of accounting, he added that the developments in information technology and the accounting profession have brought about changes that may assist in this transition.

The CGA is the principal advisor to Government of India on all accounting matters, and is responsible for maintaining the Chart of Accounts used by the Union and State Governments, as also the administration of Receipt and Payment Rules, and maintaining the exchequer control through the Officials of the Indian Civil Accounts Organisation. Since its creation over three decades ago, the Civil Accounts Organisation has achieved prompt payments and settlements of claims, timely rendition of all accounting information to the stakeholders. This has resulted in greater transparency, accountability and thus a greater confidence in the public.

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BSC/SS/GN-168/08

Accrual accounting transition: government to adopt accrual basis to improve costing, resource allocation and financial transparency. The Union Government has accepted in principle a phased transition from the current cash basis to an accrual basis of accounting to enable measurement of the full cost of services, better resource allocation, and improved asset and liability management. The Controller General of Accounts will continue as principal adviser, maintaining the Chart of Accounts, administering receipt and payment rules, and preserving exchequer control through the Civil Accounts Organisation while information technology and accounting developments facilitate the gradual shift.