5.15.3 Prior Period Adjustments: Adjustments relating to "Proforma Correction" in respect of the type of transactions referred to in para 5.15.2 will not be passed through the regular monthly accounts, and they will not be shown in the SCT. Even the opening balances in such cases will not be corrected with a foot note. However, a full account of such adjustments in an account named "Prior Period Adjustment Account" will be submitted with the material for the Union Government Finance Accounts, in terms of IGAS 4.
Note: APPENDIX 5.2 to this Chapter provides illustration of such types of transactions. Part I contains three different examples falling under this category while Part II indicates the manner in which it is to be reflected in the material for the affected statements of Finance Accounts. The part III indicates the entries generated in the computation of closing balance of "Government Account" and entering of material for the Summary of Balances, in Statement No. 5 of the Finance Accounts.
The effects of these adjustments shall be incorporated in the material for relevant statements of Finance Accounts. It will be shown distinctly in a separate line, under the opening balance of the concerned minor head below the relevant major head, with the nomenclature "Prior Period Adjustment Account". The net effect of these adjustments on "Government Account" will also be worked out for arriving at the balance as on 31st March of the year, for the purpose of inserting against the concerned head in the material for Statement No. 5 of Finance Accounts.
ILLUSTRATIVE EXAMPLE LEADING TO PREPARATION OF "SUMMARY OF BALANCES"
1. DATA FOR THE ILLUSTRATION
Supposing transactions arising during 2004-05 are as at
(a) to
(f) below, receipt of balances on ‘proforma' basis as per Para 19.3 of Chapter 19 of this Manual as at (g), and opening balances as on 1.4.2004 as at
(h) below:
(figures in …………..)
(a) Receipts (Revenue) received during the year: April, 2004 3460 May, 2004 3461 February, 2005 3459 March, 2005 (including supplementary) 3463 Progressive Total (including JEs) 13843
Total of Sectors A+B in the S.C.T. to be carried to Government Account [Form CAM-42]
(b) Expenditure (Revenue) incurred during the year April, 2004 3353 May, 2004 3352 February,2005 3354 March, 2005 (including Supplementary & JEs) 3355 (Progressive Total (including JEs) 13414 Total of sectors A+B+C+D in the S.C.T. carried to a Government Account [Form CAM-42]
What This Means
This para covers Prior Period Adjustments, which are a special category of Proforma Corrections. Unlike regular proforma corrections, these adjustments are not passed through regular monthly accounts and are not shown in the Statement of Central Transactions (SCT). The opening balances are not corrected with footnotes either. Instead, a separate 'Prior Period Adjustment Account' is maintained and submitted as material for the Union Government Finance Accounts, following Indian Government Accounting Standard (IGAS) 4. The effects are shown distinctly in Finance Accounts statements under a separate line below the opening balance. Appendix 5.2 provides illustrative examples in three parts covering different transaction types and their reflection in Finance Accounts.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
1Prior Period Adjustments are not passed through regular monthly accounts or shown in the SCT
2Opening balances are not corrected with footnotes for these adjustments
3A separate 'Prior Period Adjustment Account' is maintained for submission with Finance Accounts material
4Compliance with Indian Government Accounting Standard (IGAS) 4 is required
5Effects are shown as a distinct separate line in Finance Accounts statements
Practical Example
A government department discovers that a major loan balance of Rs 50 crore was misclassified three years ago. Since this involves a balance head and the transaction type falls under Prior Period Adjustment (as described in the illustrative examples in Appendix 5.2), the correction cannot be made through regular monthly accounts. Instead, the Principal Accounts Office prepares a Prior Period Adjustment Account showing the reclassification, following IGAS 4 standards. This adjustment account is submitted with the material for the Union Government Finance Accounts, where it appears as a separate line item below the opening balance of the affected heads.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
How are Prior Period Adjustments different from regular Proforma Corrections?▼
Regular proforma corrections are processed through monthly accounts, while Prior Period Adjustments are kept outside regular accounts entirely. They are maintained in a separate 'Prior Period Adjustment Account' and submitted only with Finance Accounts material.
What is IGAS 4?▼
Indian Government Accounting Standard 4 deals with the accounting treatment of prior period items and changes in accounting policies. It prescribes how adjustments to earlier years' figures should be presented in government financial statements.
Where can I find examples of Prior Period Adjustments?▼
Appendix 5.2 to Chapter 5 of CAM provides illustrations in three parts: Part I shows different transaction examples, Part II shows Finance Accounts statement entries, and Part III shows the computation of Government Account closing balance and Summary of Balances entries.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
(c) Expenditure (Capital) incurred during the year April, 2004 560 May, 2004 561 February, 2005 559
March, 2005 (including Supplementary) 563 Progressive Total (including JEs) 2243 Total of Sectors A+B+C+D in the S.C.T. carried to Government Account [Form CAM-42]
(d) DDR Transactions (Receipts) during the year: Sector April,04 May,04 February, March,05 Progressive total (including 05 (Including JEs JEs) etc.) as per SCT under respective sector carried to Sector-wise Ledger Form CAM -41 E 4602 4601 4603 4602 18408 F 572 573 571 572 2288 I I 816 817 816 818 3267 J 151 151 153 151 606 K 583 584 585 583 2335 L 105 106 105 107 423 M 16 16 16 16 64 TOTAL 6845 6848 6849 6849 27391
(e) DDR Transactions (Payments) during the year:
Sector April,04 May,04 February, March, 05 Progressive total (including 05 (including JEs etc.)JEs) as per SCT under respective sector carried to Sector-wise Ledger Form CAM -41 E 3374 3373 3375 3374 13496 F 1038 1040 1038 1039 4155 I 459 458 459 461 1837
J 126 127 126 126 505 K 555 556 555 556 2222 L 173 172 175 174 694 M 40 40 41 41 162 TOTAL 5765 5766 5769 5771 23071
(f) DDR heads closed to Government (RBD in this case) appearing on debt side:
April,04 May,04 February,05 March,05 Progressive total (including JEs) figure appearing in SCT against the head 8675-RBD carried to Government Account [Form CAM-42] 627 630 626 623 2503
(g) During the year balances were received by the Pr. A.O. on `proforma' basis from another such office as follows:-
Debit balance of ₹80 crores under Sector F (Loans & Advances), and of ₹5 crores under Sector L (Suspense & Misc., other than Major Heads 8675 and 8680) and Credit balance of ₹21 crores under Sector I (Small Savings, P.F. etc.). and of ₹7 crores under Sector K (Deposits & Advances).
(h) Closing balances under various DDR heads of the preceding year (i.e. as on 31.3.2004) which would be opening balances as on 1.4.2004 are as follows:-
In Pr. A.O. books In CGA's books Dr. Cr. Dr. Cr. Govt. Account 15184 -- E. Public Debt -- 23068 E. Public Debt -- 23068 F. Loans & Advances 17920 -- F. Loans & Advances 17920 -- Contingency Fund -- 50 I. Small Savings & P.F. etc. -- 7699 I. Small Savings & P.F. -- 7699 etc.
J. Reserve Funds -- 1027 J. Reserve Funds -- 1027 K. Deposits & Advances -- 1743 K. Deposits & Advances -- 1743 L. Suspense & Misc. (except 405 -- L. Suspense & Misc. 405 -- 8675 & 8680) (except 8675 & 8680) M. Remittances 28 -- M. Remittances 28 -- N. Cash Balance 15234 -- 33537 33537 33587 33587
Notes : (1) For purposes of simplicity of the illustration, break up of figures has not been indicated under the sectors F,J,K & L into categories as follows as normally required in the summary of balances (Statement No.5 of Finance Accounts).
(c) Other Accounts Gross balance Investment Accounts with Govts. of foreign countries
Note : (2) In the illustration, for the sake of simplicity, all figures are shown in crores of rupees only, though these documents are to be prepared up to unit of rupee and transactions under
(a) to
(f) of the data are shown as though they occurred during 4 months only.
Note :(3) For the sake of simplicity in the illustration, the transactions/balances in one Principal Accounts Office and its effect reflected in the books of accounts of CGA's office are indicated though the portion of the data showing receipt of balances on `proforma' basis during the year from a different Principal Accounts Office pre-supposes the existence of another Principal Accounts Office whose balances should have also formed part of the balances held in the books of the CGA but not specifically indicated in the illustration.
Note :(4) For the sake of simplicity, it has been assumed that the entire balance under `108- Public Sector Bank Suspense' and ‘138-Other Nominated Banks (Private Sector Banks) Suspense’ has been cleared and transferred to the head `8675-Deposits with Reserve Bank' by the Pr. A.O., before close of the accounts.
II. SECTORWISE ABSTRACT (LEDGER) OF DDR HEADS CLOSING TO BALANCE COMPUTATION OF "GOVERNMENT ACCOUNT" AND STATEMENT OF "SUMMARY OF BALANCES".
The above documents as in the books of Pr. A.O. and the last one as in the books of CGA adopting the assumed data are as shown in CAM -41, 42 & 43 and Summary of Balances. The figures adopted by the Pr. A.O. on `proforma' basis are shown distinctly in italics in these forms for early tracing.
Illustrative Example
PART I. Prior Period Adjustment Account
Sl.No. 1. Dr. 7601-Loans and Advances to State Governments 0.10 -Loans for Central Plan Schemes crore -Fisheries-Inland Fisheries To Cr. 0.10 crore Government Account Reasons for the `P.P.A.A.':- Decision of Govt. vide sanction No. ........dated to treat a GIA of ₹0.10 Crore (booked to head `3601' which is closed to Govt. Account) given to State `A' during 1981-82, as a loan with retrospective effect. (This will affect material for Statements No.13, 15 &5). 2. Dr. 7053-Loans for Civil Aviation 33 Crores To Cr. 33 crores 5053-Capital Outlay on Civil Aviation Reason for the `P.P.A.A.' :- Decision of Government to book expenditure on debentures to a loan head instead of to the investment head (viz. Major Head 5053 which is closed to Govt. account) as was the earlier practice. (This will affect material for Statements No.10, 13 & 5). 3. Dr. 4858-Capital Outlay on Engineering Industries 12 04-Ship Building Industries Crores Cr. 12 To Crores 4858-Capital Outlay on Engineering Industries (minus 05-Aircraft Industries debit) Reasons for `P.P.A.A.'. :- Decision of Govt. to book outlay on investment in Garden Reach Ship builders and Engineers Ltd. to the former head instead of to the latter head as was the earlier practice. Both the heads affected close to Govt. Account. (This will affect material for Statement No.10 only but will not affect `Government Account').
4. Dr. Government Account To 10000 …………………(Any Capital Head) (-)Dr. 10000 thousan ds Reason: Disinvestment of ……….(No. of Shares) of face value of ……..each amounting to Rs…………in respect of …………..(Name of the Company whose shares have been disinvested) thousan ds (This will affect the statement no. 10 and 11) (This same PPA can be proposed in case of write down of equity/ shares)
Part II - Entries relating to Serial No.1 of Part I
Amoun t Receipts Disbursements Amount as on t On 31-3-05 1-4-04
(a) Entries under material for Statement No.15 of Finance Accounts, 2004-05 7601-Loans and Advances to State Governments Prior Period Adjustment Account Dr. O1 R1 D1 O1+P1+D1-R1 =0.10 crore Dr. P1 0.10 crore
(b) Entries under material for Statement No.15 of the Finance Accounts
7601-Loans and Advances to State Governments -State of 'A'
Part III - Entries for Computation of closing balance of GOVERNMENT ACCOUNT as on 31.3.05 on account of Serial No.1 of Part I.
Sector Dr. Cr. Opening balance as on 1.4.04 (excluding the 0 Prior Period Adjustment Account) Net effect of Prior Period Adjustment Account 33.10 Adjusted Opening balance as on 1.4.04 0-33.10 A + B Receipts(Revenue) A+B+C+D Expenditure(Revenue) A+B+C Expenditure(Capital) G(M.H.7999) L(M.H.8675 & D.D.R. Heads (closed to Govt. Account). 8680) Net effect of balances adopted/ transferred proforma reversing its side Total O+T1 T2+33.10 Closing balance transferred to Summary of O+P+T1 Balances +T2 -33.10 O = Opening Balance
P = Prior Period Adjustment Account T1 = Total under Col. Dr. excluding
(a) Opening balance and
(b) Prior Period Adjustment Account. T2 = Total under Col. Cr. excluding figures relating to net effect of balances adopted/transferred proforma and also excluding Prior Period Adjustment Account.