Differences between Government & Commercial Accounts

      Are the Government Accounts and Commercial Accounts are same or not?  If not explain the differences between both with the backdrop of Indian Railways ? 

      The Indian Railways is a departmental commercial undertaking of the Government of India. That means on one side, It performs as departmental functions like other Government depts such as Defence, Finance, CPWD, etc and on other side act as Commercial undertaking since Railways manufacture and sells the perishable commodity "TRANSPORT".  Hence the accounts of Indian Railways should comply the Government Accounts as well as Commercial Accounts.

       To achieve this distinguishing accomplishment,  Indian Railways has performing dual role of maintaining  the both sets of Accounts with the help of Four suspense Heads i.e., 1. Demands Payable (DP) 2. Labour  3. Traffic Account  4. Demands Recoverable.  These are called "LINK HEADS", since the same are linking Government accounts and Commercial Accounts.  The discussion on LINK HEADS will be discussed separately in the same blog.

      The following features are the differences between Government accounts and Commercial Accounts.

GOVERNMENT ACCOUNTS	COMMERCIAL ACCOUNTS
1. Government Accounts are maintained on CASH basis. It accounts Actual cash receipts and actual cash payments during the financial year.	A.  In Commercial Accounts, ACCRUAL is the basis. That means Accrued earnings, whether realised or not, and the liabilities incurred, whether actually disbursed or not.   In the above example,
2. The Govt. Accounts are technically known as "FINANCIAL ACCOUNTS"  and maintained in accordance with the requirements of Government Accounts.  These accounts compiled annually for the purpose of representing a Consolidated Fund duly classified under the heads of accounts prescribed for Government accounting system.	B.  The Commercial Accounts are technically knows as "CAPITAL AND REVENUE ACCOUNTS".   These accounts facilitate a review of finances of the Railway as Commercial undertaking.  These are compiled every and included in the Annual Report of the Railway.
3. Mostly Government Accounts are maintained on Single entry system.	C. Commercial Accounts are maintained on Double entry system. (For every Debit, there is equivalent Credit existed)
4. Government prepares Accounts of its incomings and outgoings only. (Not Profit & Loss A/c and Balance Sheet, since it is not commercial oriented)	D. Commercial firms prepares Profit & Loss A/c and Balance Sheet to know how much profit they earned during the year and what is their position (Assets and Liabilities) at the end of the year.
E. Government Accounts are designed "How little money it (Govt) need to take out of the pocket of the tax payer (citizen) in order to maintain its necessary activities i.e., welfare of the people, defence of the country etc".	E. Commercial Accounts are designed to show how much money the firm can put into the pockets of the owner/business in the form of Profit.