RAILWAY ACCOUNTING

Evolution of Financial Systems of Indian Railways : In 5 Stages

i. Railway finance was a part of Finance department and Accounting was done by the
Accountant General,
ii. Appointment of Financial Commissioner in 1923.
iii. AG replaced by Controller of Railway Accounts and Director of Railway Audit under
Auditor General. Beginning of Indian Railway Accounts Service
iv. Railway accounts under General Manager. Chief Accounts Officer reports to GM. Change
of designation to Financial Adviser and Chief Accounts Officer (FA&CAO.)
v. Distinct Finance branch under FA&CAO.

General Books. – For the purpose of collecting and bringing to account the transactions of his
accounts circle and for compiling the monthly and annual accounts, the Accounts Officer should
maintain certain essential records, which for brevity, are referred to in this code as the “General
Books” of the railway which comprises:-

(1) The Daily Abstract of Cash Transactions or the General Cash book

(2) The Monthly Classified Abstract of Cash Transactions or the General cash Book.

(3) The Journal

(4) The Ledger

A. RAILWAY ACCOUNTS AS A COMMERCIAL ENTERPRISE

• Capital and revenue transactions

• Capital and revenue accounts

• Profit and loss account and balance sheet prepared at close of financial year

B. RAILWAYS ACCOUNTS AS A GOVT. ENTERPRISE

I. Consolidated Fund of India(Part I)Article 266

Part-I comprises of three main divisions namely Revenue, Capital and Debt. In the case of
Railways Traffic earnings are the main source of revenue. The second division deals with
expenditure incurred with the object of increasing assets of a material character and also
receipts intended to be applied as a setoff to capital expenditure. The third division comprises,
so far as Railway Accounts are concerned, of loans and advances made by Government together
with the repayments of the former and recoveries of the latter.

Part-II i.e. contingency fund of India- In this part are recorded transactions connected with the
Contingency Fund set up by the Government of India under Article 267 of the Constitution.

Part-III i.e. Public Account of India has two main divisions i.e.

i. Debt and deposits

VARIOUS FUNDS MAINTAINED BY THE INDIAN RAILWAYS

This was started with effect from 1-4-1924, to provide for the cost of renewals and replacements of
assets, as and when they become necessary. The scope of the fund has varied from time to time and
the present position is that appropriation to the fund is made on the basis of the recommendations
of the Railway Convention Committee. Annual contribution to the fund is decided on the basis of an
overall assessment for the whole plan period. Expenditure from the fund is incurred on the general
principle that the full cost of replacement of an asset, including the improvement and inflationary
elements, is chargeable to DRF.

2. RAILWAY PENSION FUND

This fund was created with effect from 1-4-1964, to even out the pension charges and to provide, on
an annual basis, for the accumulated liability for the pension benefits earned in each year of service
by the employees, in the same way as provision is made for DRF. Pension Fund is not used for
financing assets. Its is only used for making payment of Pensions and DCRG, etc.

3. DEVELOPMENT FUND

The fund was started as a Railway betterment fund in 1946 and was renamed as Development Fund
with effect from 1-4-1950. It is financed by crediting to it a part of surplus (excess of Revenue
Receipts over revenue expenditure including dividend) as voted by Parliament through 'Demands for
Grants' . It is utilized for meeting expenditure on various items of Passenger and Other Railway
users' amenity works; staff welfare works, un-remunerative operating improvement works and
safety works etc., costing more than Rs.10 lakhs each.

4. SAFETY FUND

This fund is created partly by appropriation from excess of revenue receipts over revenue
expenditure (including dividend) and also by transfer of funds by Central Government from Central
Road fund. This fund is used for financing works relating to conversion of unmanned level crossings
and construction of ROBs/RUBs at busy level crossing.

5. SPECIAL RAILWAY SAFETY FUND (SRSF)

Pursuant to the recommendations of Railway Safety Review Committee (1998), under Mr. Justice
Khanna, this fund was created w.e.f. 1.10.2001 to wipe out the arrears of renewal of over-aged
assets viz. tracks, bridges, rolling stock and signalling gears, besides safety enhancement works, over
a six-year period. This Rs 17,000 Crores fund comprises of Rs. 12,000 crores to be given by Central
Government and Rs. 5,000 crores to be generated by Railways through safety surcharge on
passenger fares. Works financed from this fund appear in the “Green-Book”, which is a part of
Budget Documents. All the railway funds are interest bearing, and are kept in deposit with the
Central Government

6. OLWR

OLWR- open line works , is not a fund. This is a peculiar kind of revenue expenditure, (a part of
Miscellaneous Expenditure as mentioned above) and is used for financing small value capital
expenditure related to unremunerative operating improvements, staff quarters and amenities,
safety related works etc.

CASH IMPREST

It is a standing advance of a fixed sum of money to meet the following:

1. Petty office expenses

2. Cost of raw material for the list of indoor patients of hospital

3. Emergent charges which cannot be foreseen

4. Other petty expenses.

Emergent petty advances may also be made on the responsibility of the imprest holder out of the
imprest money placed at his disposal. . The cash Imprest is sanctioned by the General Manager of a
Railway, or his delegated authority, subject to the advice of Accounts Officer regarding the amount
of the imprest. The amount of cash IMPREST should be the lowest possible figure calculated to be
sufficient for meeting the charges of the nature previously specified.
Capital and Revenue Accounts: –
The accounts of a railway presented in such a form as to facilitate a review of the finances of the railway as a
commercial undertaking are known as “Capital and Revenue Accounts”. The Capital and Revenue Accounts of
a railway are complied every year and included in the Annual Report of the Railway. The various processes of
accounting followed in Railway Accounts offices lead up to these accounts. The financial results of the working
of a railway cannot be adequately gauged unless separate accounts are maintained of its Capital transactions
as distinguished from its Revenue transactions.

Capital transactions may be broadly described as those which pertain to the acquisition of concrete assets
while Revenue transactions are those which relate to the working of the railways, comprising both earnings
and working expenses.

The expenditure incurred on acquiring concrete assets in connection with (i) unremunerative projects, (ii)
amenities to passengers and other railway users, (iii) amenities to staff, and (iv) safety works, financed from
the Development Fund, the Accident Compensation, Safety and Passenger Amenities Fund and Revenue (Open
Line Works-Revenue) is accounted for separately.

The expenditure on renewals and replacements of railway assets is financed from the Depreciation Reserve
Fund and is accounted for accordingly.

Expenditure of a capital nature incurred on railway assets is classified under five heads viz., Capital,
Depreciation Reserve Fund, Development Fund, Accident compensation, Safety and Passenger Amenities Fund
and Revenue (Open Line works-Revenue)