Rule 18 — GAR
Original Rule Text
# 18. Proforma Accounts
The: operations of some departments of Government sometimes include undertakings of a commercial or a quasi-commercial character e.g., an industrial factory or a store. Even though they may be maintained almost entirely for the benefit of the Department, it is still necessary that the: financial results of the undertaking should be expressed in the normal commercial form so that the cost of the: service or undertaking may be accurately known. This implies the maintenance of suitable Capital, Manufacturing, Trading and Profit and Loss accounts and as the Government system of account being on a purely cash basis is unsuitable for each commercial accounts, they will usually be kept on a, pro forma basis outside the general accounts of Government. The actual transactions entering these pro forma accounts, except those adjusted on a liabiltyy basis, will find a place primarily in the regular accounts and the commercial accounts will be additional as well as separate. These pro forma accounts shall be maintained by the Departmental authorities themselves in such form. as may be prescribed.
Certain, pro forma accounts relating to Iriiatioo,, Navigation, Embankment and Drainage Projects and Government residential buildings are required to be prepared by Civil Account Offices. Pro forma accounts are also: sometimes required to be prepared for transactions which do not relate to commercial or quasi- commercial undertakings of Government e.g., transactions of the Famine Relief Fund. The form in which any pro forma accounts are prepared in Accounts Offices will be determined by the Government concerned on the advice of the Comptroller and. Auditor General of India.
The: accounts of Government are based, in the main, on the single entry system and: the double entry: system will be: applied only in regard to the maintenance of a set of technical accounts called the. Journa,, Ledger and Trial Balance Sheet. The: main purpose of the Journal and Ledger is to bring out by: a scientific method, the balances of: accounts in regard to which Government acts as al banker, or remitter or borrower or lender. Though such balances are worked out in the regular Government accounts, their accuracy can be guaranteed only by a periodical verification with balances brought outi in the double entry system. In the case of the Central Government, the various Accounts Officers shall prepare Ledger and summary of balances in accordance with the procedure separately prescribed for the purpose by the Controller General of Accounts. State Accountants General will maintain separate Journal and Ledger for all transactions of the State Government, from which the annual summary of Balances or Trial Balance Sheet is prepared by them.
- CHAPTER 3 BASIC STRUCTURE OF THE FORM OF ACCOUNTS
What This Means
Rule 18 addresses proforma accounts — a special category of accounts maintained outside the regular government accounts for commercially or quasi-commercially operated government undertakings. Regular government accounts are on a cash basis (only recording actual receipts and payments), which is unsuitable for evaluating the financial performance of commercial activities like factories, workshops, or irrigation projects. Proforma accounts apply commercial accounting principles (capital, manufacturing, trading, profit and loss accounts) to these activities while the actual cash transactions are also captured in the regular government accounts.
Civil Accounts Offices prepare certain specified proforma accounts — particularly for Irrigation, Navigation, Embankment, Drainage projects, and government residential buildings — to show the real economic cost and returns from these projects. The form of these proforma accounts is determined by the relevant government on CAG's advice.
The rule also introduces an important accounting concept: while government accounts are predominantly single-entry (recording only cash), a double-entry system (Journal, Ledger, Trial Balance) is also applied for a specific technical purpose — verifying balances in accounts where the government acts as banker, remitter, borrower, or lender. This double-entry verification, maintained at the level of CGA for Central accounts and the AG for State accounts, provides a scientific method to ensure the accuracy of these running-balance accounts.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Commercial or quasi-commercial government undertakings maintain proforma accounts in addition to regular government accounts.
- 2Proforma accounts use commercial accounting principles: Capital, Manufacturing, Trading, and Profit and Loss accounts.
- 3Proforma accounts are maintained outside regular accounts (on a 'proforma basis') because the cash-basis government system cannot capture commercial results.
- 4Civil Accounts Offices maintain specified proforma accounts for Irrigation, Navigation, Embankment, Drainage projects, and government residential buildings.
- 5The form of proforma accounts is determined by the concerned government on CAG's advice.
- 6Government accounts are primarily single-entry (cash basis), but a double-entry system (Journal, Ledger, Trial Balance) is also maintained for verification of running-balance accounts.
- 7The double-entry system verifies balances where the government acts as banker, remitter, borrower, or lender — particularly Debt, Deposit, and Remittance heads.
Practical Example
The Government of Karnataka runs the Karnataka Soaps & Detergents Limited factory (a departmental commercial undertaking). While all cash transactions (raw material purchases, sales proceeds) are recorded in the regular government accounts under appropriate heads, a separate proforma account is maintained showing: Capital Account (value of plant, machinery, buildings), Manufacturing Account (cost of production), Trading Account (sales revenue vs. cost of goods sold), and Profit and Loss Account (net result). This proforma account tells the government whether the factory is commercially viable — information the cash-based regular accounts cannot provide.
For government residential quarters in Delhi, the CPWD prepares proforma accounts showing the capital cost of each housing estate, the notional rent that would have been charged, and the maintenance cost. This tells the government the true economic cost of providing staff housing — a cost that would be invisible if only cash transactions were recorded. The CAG reviews and audits these proforma accounts as part of the annual audit.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
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This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.