Para 3.16.18 — MSO (Audit)
Original Rule Text
3.16.18 The principle of classification of transactions in Government Accounts is that there is a closer reference to the function, programme, scheme or activity to which the transaction (receipt or payment) relates, rather than the department in which the
expenditure or receipt occurs. Thus, the cost of construction of a hospital is classified under the major head “4210-Capital outlay on Medical and Public Health” and not under the head of account of the Public Works Department in which the expenditure on construction of the hospital is actually incurred. Similarly, interest on loans given by different departments is credited to the major head “0049-Interest Receipts” irrespective of the departments in which the interest is realised. Refunds of Revenue are taken in reduction of receipts under the concerned Receipt Head.
# A. Audit of Classification
What This Means
Government transactions are classified by function, programme, or activity rather than by the department that handles the money. For example, the cost of building a hospital goes under 'Capital Outlay on Medical and Public Health' even though the Public Works Department did the construction. Similarly, interest received on loans goes under 'Interest Receipts' regardless of which department collected it. Revenue refunds reduce the relevant receipt head rather than appearing as fresh expenditure.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Classification follows function/programme/activity, not the spending department
- 2Construction costs are classified under the functional head (e.g., Medical) not the executing department (e.g., PWD)
- 3Interest on loans from all departments is credited to major head '0049 - Interest Receipts'
- 4Refunds of revenue reduce the concerned receipt head rather than being shown as expenditure
Practical Example
The Public Works Department builds a new district hospital costing Rs 15 crore. Although the PWD incurs the expenditure, the accounts office classifies it under '4210 - Capital Outlay on Medical and Public Health,' not under the PWD's own capital head. This functional classification helps the government and legislature see exactly how much is being spent on health infrastructure.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why isn't expenditure classified under the department that actually spends the money?▼
How are revenue refunds treated in government accounts?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.