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Rule 74 - Government Accounting | KartavyaDesk

GFR 2017

Original Rule Text

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. Period of Accounts. The annual accounts of the Central Government shall record transactions which take place during a financial year running from the 1st April to the 31st March thereof. Currency in which Accounts are kept. The accounts of Government shall be maintained in Indian Rupees. All foreign currency transactions and foreign aid shall be brought into account after conversion into Indian Rupees. Main Divisions and structure of Accounts. The accounts of Government shall be kept in three parts, Consolidated Fund (Part-I), Contingency Fund (Part-II) and Public Account (Part-III). Part-I – Consolidated Fund is divided into two Divisions, namely, ‘Revenue’ and ‘Capital’ divisions. The Revenue Division comprises the following sections: ‘Receipt Heads (Revenue Account)’ dealing with the proceeds of taxation and other receipts classified as revenue and the section ‘Expenditure Heads (Revenue Account)’ dealing with the revenue expenditure met therefrom. The Capital Division comprises three sections, viz., ‘Receipt Heads (Capital Account)’, ‘Expenditure Heads (Capital Account)’ and ‘Public Debt, Loans and Advances, etc.’. These sections are in turn divided into sectors such as ‘General Services’, ‘Social and Community Services’, ‘Economic Services’, etc., under which specific functions or services are grouped corresponding to the sectors of classification and which are represented by Major Heads (comprising Sub-Major Heads wherever necessary). In Part-II – Contingency Fund- are recorded transactions connected with the Contingency Fund set up by the Government of India under Article 267 of the Constitution or Section 48 of Government of Union Territories Act, 1963. There shall be a single Major Head to record the transactions thereunder, which will be followed by Minor, Sub and/or Detailed Heads. In Part-III – Public Account- transactions relating to debt (other than those included in Part-I), reserve funds, deposits,

What This Means

Rule 74 of the General Financial Rules (GFR) 2017 is all about how the government keeps its financial records. Think of it as the foundation for understanding where the government's money comes from and where it goes. The rule states that the government's accounts must show the actual cash that was received and spent during a financial year (April 1st to March 31st), not just what's owed or expected. This ensures a clear and accurate picture of the government's financial activities during that period. All transactions are recorded in Indian Rupees, even if they initially involve foreign currency. Any foreign currency transactions are converted to INR before being entered into the accounts.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Accounts reflect *actual* cash receipts and disbursements, not accruals.
  • •The financial year runs from April 1st to March 31st.
  • •All accounts are maintained in Indian Rupees (INR).
  • •Foreign currency transactions are converted to INR.
  • •Government accounts are structured into three parts: Consolidated Fund, Contingency Fund, and Public Account.

Practical Example

Imagine Ms. Sharma, a newly appointed accountant in the Ministry of Rural Development, receives a grant of $10,000 USD from a foreign NGO for a rural sanitation project. According to Rule 74, Ms. Sharma cannot simply record the $10,000 USD. She must first convert it to Indian Rupees based on the prevailing exchange rate on the date of receipt. Let's say the exchange rate is ₹80 per USD. She would then record ₹8,00,000 (10,000 x 80) as a receipt in the relevant account under the Consolidated Fund, specifically under the 'Social and Community Services' sector. Similarly, if the ministry spends ₹5,00,000 on constructing toilets, that actual disbursement is what is recorded, not just the approved budget amount.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What does 'actual cash receipts and disbursements' mean?▼
It means only the money that has actually come into the government's accounts (receipts) or been paid out (disbursements) during the financial year is recorded. Promises to pay or receive money later are not included until the actual transaction occurs.
Why is it important to record transactions in Indian Rupees?▼
Recording all transactions in a single currency (INR) allows for easy comparison and aggregation of financial data across different government departments and programs. It simplifies the process of preparing the annual budget and financial statements.
What are the three parts of government accounts mentioned in Rule 74?▼
The three parts are the Consolidated Fund (the main account for government revenue and expenditure), the Contingency Fund (for unforeseen expenses), and the Public Account (for funds held by the government in trust, like provident funds).
Where can I find the official exchange rates for converting foreign currency?▼
The exchange rates used for converting foreign currency are usually determined by the Reserve Bank of India (RBI) or as per the guidelines issued by the Ministry of Finance.
What happens if a transaction is initiated in one financial year but completed in the next?▼
Only the actual cash receipt or disbursement is recorded in the financial year in which it occurs. The commitment or obligation is noted separately, but the actual accounting entry is made when the cash changes hands.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Rule 74 of the General Financial Rules, 2017, what should the annual accounts of the Central Government primarily reflect?

Related Rules

Rule 271General Financial Rules 2017 (amended July 2024) - Rule 271 - Chapter 10Rule 109General Financial Rules 2017 (amended July 2024) - Rule 109Rule 146General Financial Rules 2017 (amended July 2024) - Rule 146 - Chapter 6Rule 169General Financial Rules 2017 (amended July 2024) - Rule 169 - Chapter 6Rule 215General Financial Rules 2017 (amended July 2024) - Rule 215 - Chapter 6

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