Para 2.12.1 — CAM
Original Rule Text
2.12.3 The method of accounting applied to the Reserve Funds mentioned in para 2.12.1 should be as follows, and in keeping with the aforementioned principles: -
The grants from outside agencies that do not retain control over the expenditure met there from and the grants from other Government will, in the first instance, be taken to the relevant receipt head of account of the Government. Simultaneously, an amount equivalent to the grant received and credited to the receipt head will be transferred to the relevant head in the Reserve Fund/Deposit section of accounts by debit to the service major head concerned. In the case of Fund referred to in
(ii) of para 2.12.1 above, the amounts set aside by the Union/State Government from the CFI/State to provide reserves for expenditure to be incurred by themselves on particular purposes should likewise be taken to the Reserve Fund head opened for the purpose. In both cases, in order to bring the expenditure from the Fund into the Appropriation Accounts, the expenditure should be accounted for under the relevant service head of expenditure under which provision of Funds has been made and an equivalent amount will be credited to the service head concerned by transfer from the Reserve Fund/Deposit Head concerned and shown as a deduct entry there under. Provisions contained in para 3.4 of General Directions to the LMMHA may be referred for the accounting procedure relating to Reserve Funds.
2.12.4 The principles and procedure prescribed in this paragraph do not apply to certain transactions for example those pertaining to Famine Relief Funds and Sinking Funds for loans, which are governed by special arrangements. In the case of Regulatory Bodies, different procedure has been adopted, whereby the receipts of the regulatory bodies are being credited directly to the Fund, without routing it through CFI. However, for the expenditure the procedure remains unchanged and is required to be budgeted, unless specifically exempted.
2.12.5 Contributions towards share capital in non-departmental commercial and Industrial undertakings will be recorded under the concerned Programme Minor Heads below relevant functional Major Head of Account. Loans paid to these undertakings will be classified similarly under the concerned Programme Minor Heads below the relevant functional Loan Major Head of Account.
What This Means
This paragraph details the specific accounting method for Reserve Funds. Grants from outside agencies that do not retain control over spending are first credited to the relevant receipt head, and an equivalent amount is simultaneously transferred to the Reserve Fund section by debiting the service major head. When expenditure is incurred from the Fund, it flows through the service head with a contra adjustment from the Fund. This double-entry approach ensures that both the receipt and the fund utilization are transparently reflected in government accounts.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Grants from outside agencies are first credited to the receipt head, then transferred to the Reserve Fund
- 2Transfer is done by debiting the service major head with contra credit to the Reserve Fund head
- 3Expenditure from the Fund is routed through the service head with corresponding debit to the Fund
- 4This double-entry approach ensures transparency in both receipts and fund utilization
- 5Grants from agencies that retain control over spending may have different accounting treatment
Practical Example
The World Bank provides a Rs.100 crore grant to a Government of India clean water program, without retaining control over the spending. The PAO first credits Rs.100 crore to the receipt head '1606-Aid Materials'. Then, Rs.100 crore is debited to the service major head (e.g., 2215-Water Supply) with a contra credit to the Reserve Fund head. When Rs.20 crore is spent on a water purification plant, the expenditure is shown under 2215 with a contra debit to the Fund, reducing the fund balance to Rs.80 crore.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why is the grant first credited to the receipt head and not directly to the Fund?▼
What if the granting agency retains control over how the money is spent?▼
How does this accounting approach ensure accountability?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.