Para 2.10 — CAM
Original Rule Text
2.10 CHECK OF CLASSIFICATION IN ACCOUNTS
2.10.1 The transactions dealt with in the departmental accounts organizations should be classified in accounts strictly under the Major and Minor Heads shown in the List of Major and Minor Heads of Account as amended/updated from time to time. The detailed classifications
below the Minor Heads will be as shown in the Detailed Demands for Grants and entered in Union Budget Information System (UBIS).
ALLOCATION OF EXPENDITURE BETWEEN CAPITAL AND REVENUE
2.11.1 The classification of expenditure as Capital or Revenue will broadly depend on the following conditions:
(i) Capital expenditure may be generally defined as expenditure incurred with the object of either increasing assets of a material and permanent character or of reducing liabilities.
(ii) It is inherent in the definition of capital expenditure that the assets produced should belong to the authority incurring the expenditure.
(iii) Expenditure by Government on grants-in-aid to local bodies or institutions for the purpose of assets creation which will belong to these local bodies or institutions are not classified as capital expenditure in the books of the grantor.
(iv) Expenditure on a temporary asset cannot ordinarily be considered as expenditure of capital nature.
Note: Rule 8 of Delegation of Financial Power (Amendment) Rules, 2022 provides that purchase of office equipment, furniture and fixtures, Digital equipments exceeding the threshold limit ₹ one lakh or three years of useful life, either of the two, as decided by the Government from time to time should be classified as ‘capital’ expenditure under the relevant Object Head ‘Machinery and Equipment’, Furniture and Fixtures’ and Information, Computer, Telecommunications (ICT) equipment respectively. However, the distinction between Revenue and Capital Expenditure shall be as defined in the Government Accounting Rules, 1990.
2.11.2 When it has been decided that the expenditure on a scheme for creation of a new or additional asset shall be classed as 'Capital' the following main principles shall be applied for the treatment of expenditure in accounts:
2.11.2.1 Capital bears all charges for the first construction of a project as well as charges for intermediate maintenance of the work while not yet opened for service including charges for such further additions and improvements, as may be sanctioned under rules made by competent authority.
What This Means
The PAO must ensure that all transactions are classified strictly according to the List of Major and Minor Heads of Account, as updated from time to time, and the detailed classifications shown in the Detailed Demands for Grants entered in UBIS. Additionally, expenditure must be correctly classified as either Capital or Revenue based on specific criteria: broadly, expenditure that results in acquisition or creation of assets is Capital, while operational and maintenance expenses are Revenue.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1All transactions must be classified under Major and Minor Heads from the official List of Heads of Account
- 2Detailed classifications below Minor Heads follow the Detailed Demands for Grants in UBIS
- 3Capital expenditure involves acquisition, creation, or enhancement of assets
- 4Revenue expenditure covers operational, maintenance, and recurring expenses
- 5Correct classification is essential for accurate budget monitoring and financial reporting
Practical Example
A Ministry purchases new office furniture worth Rs.10 lakh and also spends Rs.2 lakh on annual maintenance of existing furniture. The PAO classifies the Rs.10 lakh purchase as Capital expenditure (asset acquisition) under the appropriate Capital Major Head, and the Rs.2 lakh maintenance as Revenue expenditure under the Revenue Major Head. If the DDO mistakenly classifies both under Revenue, the PAO must flag the error and propose a transfer entry to correct the classification.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What is UBIS and how does it relate to account classification?▼
How does a PAO determine whether expenditure is Capital or Revenue?▼
What happens if a transaction is classified under the wrong head?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.