Lok Sabha Question No. 359 (STARRED), answered on 2016-08-10
Subject: Anomalies in Railways' Accounting System
Ministry: RAILWAYS
Asked by: POONAMBEN HEMATBHAI MAADAM

## GOVERNMENT OF INDIA MINISTRY OF RAILWAYS

## LOK SABHA STARRED QUESTION NO.359 TO BE ANSWERED ON 10.08.2016

## ANOMALIES IN RAILWAYS' ACCOUNTING SYSTEM

*359.   SHRIMATI POONAMBEN MAADAM: Will the Minister of RAILWAYS be pleased to state:

(a) whether the World Bank and the International Monetary Fund have pointed out the anomalies in the accounting system of Indian Railways; (b) if so, the details thereof and the reaction of the Railways thereto; (c) whether the Railways is considering to move to an accrual system to  mitigate major issues with the current system; and if  so,  the  details  thereof  and  the  salient  features  of  the  said

## ANSWER

## MINISTER OF RAILWAYS

(SHRI SURESH PRABHAKAR PRABHU)

(a) to (d):  A Statement is laid on the Table of the House.

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(d) system?

STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (d) OF STARRED QUESTION NO.359 BY SHRIMATI POONAMBEN  MAADAM  TO BE ANSWERED IN LOK SABHA ON 10.08.2016 REGARDING ANOMALIES IN RAILWAYS' ACCOUNTING SYSTEM

- (a) No, Madam. No communication has been received from the World Bank or International Monetary Fund pointing out anomalies in the accounting system of Indian Railways.
- (b) Does not arise.
- (c) Indian  Railways  (IR)  is  a  department  of  the  Government  of  India and accordingly it is required to maintain its Accounts as per the form and format mandated by the Controller General of Accounts and  the  Comptroller and  Auditor General  of India.  However, pursuant to the recommendations of Twelfth Finance Commission and Government Accounting Standards Advisory Board (GASAB) for transition  to  Accrual  Accounting  in  Government  departments, Indian Railway has embarked upon an Accounting Reforms Project which,  inter  alia,  includes  introduction  of  Accrual  Accounting,  in addition  to  the  existing  cash  based  accounting  statements,  to reorient  financial  reporting  of  operating  and  financial  position  of Indian  Railways.  This  will  facilitate  improved  decision  making  to enhance  efficiency, effectiveness of public spending through creation of more accurate and accessible financial information and improved resource allocation due to a better insight into costs of policy and transparency of results.
- (d) Indian  Railways  has  initiated  pilot  studies  on  introduction  of Accrual Accounting at North Western Railway (NWR), Jaipur and

Rail  Coach  Factory  (RCF),  Kapurthala.  The  pilot  studies  aim  to prepare accrual based financial statements of North Western Railway, Jaipur (a Zonal Railway) and Rail Coach Factory, Kapurthala, (a  Production  Unit)  which  inter  alia  include  the  Profit  and  Loss statement, Balance Sheet and Cash Flow statement.

The  salient  feature/basic  tenet  of  Accrual  Accounting  is  that under this system of accounting, financial transactions are recorded in the accounting period in which they accrue and arise, whether or not a receipt or payment occurs. In contrast, cash based accounting, followed by government departments including IR, records the revenue and expenditure only when the money is received or paid out. Thus  the  main  difference  between  the  cash  and  accrual  basis  of accounting is the timing of the recognition of revenue and expenses.

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