Rule 21 — GAR
Original Rule Text
21. Cash basis of Accounts
With the exception of such book adjustments as may be authorised by these rules or by any general or special orders issued by the Central Government on the advice of the Comptroller and. Auditor General of India, the transactions in Government accounts shall represent the actual cash receipts and disbursements during a financial year as distinguished from amounts due to or by' Government during the same period.
What This Means
Rule 21 establishes the fundamental principle that government accounts are maintained on a cash basis. This means the accounts record only actual cash receipts and actual cash disbursements during the financial year — not amounts that are due, accrued, or committed but not yet received or paid. A salary that is due on 31st March but not actually paid until 2nd April will appear in the accounts of the next financial year, not the current one.
This cash basis principle is a deliberate choice reflecting the nature of government accountability — Parliament approves appropriations (spending limits) and the government must account for what was actually spent from public funds, not what was theoretically owed. Controlling cash expenditure against voted grants is the primary accountability mechanism.
The only exception to the cash basis rule is for 'book adjustments' specifically authorized by GAR or by general/special orders issued by the Central Government on CAG's advice. Book adjustments are non-cash accounting entries made to record transactions (like inter-departmental transfers, adjustments of advances, or correction of errors) where no actual cash changes hands but the accounts need to reflect the economic reality of the transaction.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Government accounts are maintained on a cash basis — only actual cash receipts and disbursements during the financial year are recorded.
- 2Amounts due to or from the government that have not been actually received or paid are not recorded as income or expenditure.
- 3This is different from the accrual accounting used by commercial entities.
- 4Book adjustments (non-cash accounting entries) are the only exception, and these must be authorized under GAR or by the Central Government on CAG's advice.
- 5The cash basis ensures that accounts directly track public funds appropriated and spent, maintaining a clear link between parliamentary appropriations and actual expenditures.
- 6The practical consequence: a payment made after 31st March is in the next year's accounts, even if the liability arose in the current year.
Practical Example
The Ministry of Housing owes Rs. 25 crore to a construction contractor for work completed by 30th March 2025. However, due to processing delays, the cheque is issued on 3rd April 2025. Under the cash basis rule (Rule 21), this Rs. 25 crore is recorded in the 2025-26 accounts, not 2024-25, even though the liability arose before year-end. The contractor may have done all the work in 2024-25, but the government's accounts only capture the cash outflow of 3rd April 2025.
Contrast this with a book adjustment: suppose the Ministry of Finance needs to transfer Rs. 100 crore from its own Minor Head to a different Minor Head within the same Major Head, due to a reclassification of expenditure. No actual cash changes hands — both heads belong to the same ministry. This transfer is effected as a book adjustment (journal entry) and does not require any physical payment. Such book adjustments are the only non-cash entries permitted under Rule 21.
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.