Link Heads between Govt Accounts & Commercial
Accounts
First,
let us discuss, the differences between Govt Accounts & Commercial Accounts
|
GOVERNMENT ACCOUNTS |
COMMERCIAL ACCOUNTS |
|
1.
Maintained on CASH
basis. It accounts Actual
cash receipts and actual cash payments during the financial year. |
1.
Maintained on ACCRUAL
basis. That means Accrued earnings,
whether realised or not, and the liabilities incurred, whether actually
disbursed or not. |
|
2.
Technically known as "FINANCIAL
ACCOUNTS" 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. |
2. Technically knows as "CAPITAL AND REVENUE 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. Note: At present, it
is not in operation. All Govt organisations are maintained their accounts
under Double Entry System only |
3. 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) |
4. 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. |
|
5. 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". |
5. 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. |
The Link Heads are Four. They are 1. Demands Payable 2. Demands
Recoverable 3. Traffic & 4 . Labour
|
Demands Payable |
Demands Recoverable |
Traffic |
|
Labour |
|
Revenue |
Revenue |
Revenue |
Capital |
|
|
|
Demands Payable |
Labour |
|
Traffic |
Demands Recoverable |
|
Operated on |
|
Expenditure side |
Expenditure side |
|
Earnings side |
Earnings side |
|
Always having |
|
Credit balance |
Credit balance |
|
Debit balance |
Debit balance |
How link is established between Govt & Commercial Accounts
|
SN |
|
Receipts |
Amount (Rs. ) |
|
SN |
Expenditure |
Amount (Rs. ) |
|
|
1 |
Commercial
A/cs |
Coaching Earnings |
30 |
|
1 |
Ordinary Working Expenses |
70 |
Commercial
A/cs |
|
2 |
Goods Earnings |
60 |
|
2 |
Appropriation to DRF |
15 |
||
|
3 |
Sundry Earnings |
10 |
|
3 |
Appropriation to Pension Fund |
10 |
||
|
4 |
Gross Earnings (1+2+3) |
100 |
|
4 |
Gross Working Expenses (1+2+3) |
95 |
||
|
5 |
|
Suspense
(Traffic & DR) |
- 10 |
|
5 |
Suspense
(DP) |
+ 5 |
|
|
6 |
Govt A/cs |
Gross Receipts (4+5) |
90 |
|
6 |
Gross Expenditure (4+5) |
100 |
Govt. A/cs |
|
7 |
Misc Receipts |
25 |
|
7 |
Misc. Expenditure |
5 |
||
|
8 |
Total Revenue Receipts
(6+7) |
115 |
|
8 |
Total Revenue Expenditure |
105 |
Net Receipts/Net
Revenue/Surplus = 115 -105 = 10.
The above surplus will be
distributed/appropriated among various funds such as Development Fund, RRSK,
Capital Fund, Debt Service Fund etc.
DEMANDS
PAYABLE
·
One of the Link Heads
connecting Government Accounts with Commercial Accounts
·
This
is a suspense head operated under Demand No.12 N (Working expenses side)
·
It is in nature of "Sundry Creditors A/c" in
commercial accounts
·
First,
It records all the revenue liabilities of the month without taking into whether
these are liquidated(settled) or not. Hence this Head is credited at this stage.
·
The
payments towards the liquidation of above liabilities are debited to the Head "Demands Payable"
and the balance represents the outstanding liabilities.
·
It
is always having a Credit balance.
·
A
separate account is kept for each month.
However on the recommendations of "Simplification
committee on procedures in Railways Accounts", the Demands
Payable Head should only be operated once towards the close of the year i.e.,
March to bring all unliquidated liabilities of that year into accounts of the
year.
·
The
object behind this practical method is "the fiscal
year for the preparation of accounts is a financial year (not on monthly
basis), the non - operation of the Head DP would not materially affect the
Railway Accounts for first eleven months.
Hence A separate account of DP for 11 months dispensed and operated in
March only in financial year. However DP
for April in subsequent year should operate only to clear the balance of
previous year.
·
Journal
Entries are
IN THE
MONTH OF MARCH ACCOUNTS
|
Date |
Transaction |
Debit |
Credit |
|
31.03.2020 |
Revenue Demands A/c (Say Demand No.3) Dr |
Rs.100 |
|
|
To Demands
Payable A/c Cr |
|
Rs. 100 |
|
|
(To bring into the
account of revenue liabilities (not discharged) of last month in March A/cs) |
|
||
IN THE
MONTH OF APRIL ACCOUNTS
|
Date |
Transaction |
Debit |
Credit |
|
01.04.2020 |
Demands Payable
A/c |
Rs.100 |
|
|
To Cheques& Bills Cr. |
|
Rs. 100 |
|
|
(To account the discharging of last
year (March) liabilities in April A/cs) |
|
||
Ledger Account of Demands Payable A/c for the month of March,
2020
|
Date |
Debit |
Amount |
Date |
Credit |
Amount |
|
31.03.2020 |
To Balance C/d |
Rs. 100 |
31.03.2020 |
By Demand No. 03 |
Rs.100 |
|
Total |
Rs.100 |
Total |
Rs. 100 |
||
|
|
|
|
01.04.2020 |
By Balance C/d |
Rs. 100 |
*****
●
Purpose: to bring to account all
dues pertaining to Rent/lease of Railway Land and Buildings and Interest and
Maintenance Charges of Sidings.
●
When the amounts due for Railway has been
raised in the form of Bills – Debited
to Demands Recoverable and Credited to Abstract Z earnings.
●
On the receipt of remittance from the parties
– Debited Cash A/c (RIB) and Credited
to Demands Recoverable.
Journal Entries:
|
Date |
Transaction |
Debit |
Credit |
|
01.04.2010 |
Demands
Recoverable A/c Dr |
Rs.100 |
|
|
To Abstract Z (Sundry
Earnings) Cr. |
|
Rs. 100 |
|
|
(Raising bills for amounts due to Railways) |
|
||
|
Date |
Transaction |
Debit |
Credit |
|
20.04.2010 |
RIB -
Remittance Into Bank A/c Dr
|
Rs.50 |
|
|
To Demands
Recoverable Cr. |
|
Rs. 50 |
|
|
(Receipt
of Cash from the parties) |
|
||
Ledger Account of Demands Recoverable A/c for the month of April,
2010
|
Date |
Debit |
Amount |
Date |
Credit |
Amount |
|
01.04.2010 |
To Abstract Z
(Sundry Earnings) A/c |
Rs. 100 |
20.04.2010 |
By RIB A/c |
Rs.50 |
|
30.04.2010 |
By Balance C/d |
Rs.50 |
|||
|
|
Total |
Rs. 100 |
|
Total |
Rs. 100 |
|
01.05.2010 |
To Balance B/d |
Rs. 50 |
|
|
|
●
Closing Balance of D.R.: Represents unrealized
amount in the form of outstanding “Demands Recoverable”
●
Examples: A. Land rent charges for
engineering and commercial plots. B. Interest, maintenance charges &
Inspection charges for sidings. C. Rent of Buildings & D. Maintenance
charges for ROBs, FOBs and level crossings.
●
These are form a part of Sundry earnings (Abstract Z)
●
Clearance under the “Demands
Recoverable” leads to reduction in Traffic Suspense. Thus resulting in Better operating
Efficiency.
●
It is always having Debit Balance.
Traffic A/c
Link Head connecting
Govt Accounts and Commercial Accounts. It is in nature of
"Sundry Debtors A/c" in commercial accounts
Debtor
- All earnings (Local & Through)
Creditor
- All Recoveries for such earnings
Balance: Unrealized earnings -
Always Debit balance
OB
- Previous Month's CB
Specimen Journal entries
|
Date |
Transaction |
Debit |
Credit |
|
01.01.2020 |
Traffic A/c Dr |
Rs.200 |
|
|
|
To Coaching
Earnings A/c Cr |
|
Rs. 200 |
|
|
(Being accounted the earnings for which
realisation is due) |
|
|
|
Date |
Transaction |
Debit |
Credit |
|
25.01.2020 |
Remittance Into Bank (RIB) A/c Dr |
Rs.150 |
|
|
|
To
Traffic
A/c Cr |
|
Rs. 150 |
|
|
(Realisation of earnings due) |
|
|
Ledger
Account of Traffic A/c for the month of January, 2020
|
Date |
Debit |
Amount |
Date |
Credit |
Amount |
|
01.01.2020 |
To Coaching Earnings A/c |
Rs. 200 |
25.01.2020 |
By RIB A/c |
Rs. 150 |
|
|
|
|
31.01.2020 |
By Balance b/d |
Rs.50 |
|
|
Total |
Rs. 200 |
|
Total |
Rs. 200 |
|
01.02.2020 |
To Opening Balance |
Rs. 50 |
|
|
|
·
So, Traffic Account, being a Suspense account operated on
Earnings side is always shows
a Debit Balance.
####
Labour Account
First
stage:
The amount on account of
Labour should be debited to "WMS Account" by credit to 'Labour
Suspense' - in Capital JV
|
Date |
Transaction |
Debit |
Credit |
|
28.01.2020 |
WMS A/c Dr |
Rs.200 |
|
|
|
To Labour
Suspense Cr |
|
Rs. 200 |
|
|
(Being the details posted from Labour
schedule) |
|
|
Second stage:
The Muster Rolls/ Labour
Pay sheets having been passed for payment and debited to 'Labour Suspense' - in
CO7s
|
Date |
Transaction |
Debit |
Credit |
|
29.01.2020 |
Labour Suspense A/c Dr |
Rs.200 |
|
|
|
To
Cheques & Bills Cr |
|
Rs. 200 |
|
|
(Being posted from the various Abstract of
Bills {CO 7s) passed For
the month) |
|
|
Ledger Account of Labour Suspense A/c for the month of January,
2020
|
Date |
Debit |
Amount |
Date |
Credit |
Amount |
|
29.01.2020 |
To Cheques & Bills A/c |
Rs. 190 |
28.01.2020 |
By WMS A/c |
Rs.200 |
|
31.01.2020 |
To Balance c/d |
Rs. 10 |
|||
|
|
Total |
Rs. 200 |
|
Total |
Rs. 200 |
|
|
|
|
01.02.2020 |
By Opening Balance |
Rs. 10 |
**