Transition to accrual accounting system to take time

The transition from a cash-based accounting system to one that is accrual-based accounting system can take nearly 12 years, according to one of the recommendations of the DN Ghosh committee being studied by the Government Accounting Standards Advisory Board (GASAB).

VN Kaul, Comptroller and Auditor-General of India, told Business Standard since India had a federal system of governance, it would take a lot of time to integrate different accounting practices of various states and municipalties with those of the Centre.

"The increasing convergence of accounting standards all over the world required us to move quickly," he said. A country like New Zealand, which had an unitary system of government took seven years for such a transition, he added.

The GASAB comprises representation from four major accounting departments of the government-the Indian Audit and Accounts Department, the Indian Civil Accounts Department, the Indian Defence Accounts Department and the Indian Railways Accounts Department.

Government accounting in India is predominantly done on cash basis, with very little correspondence with private sector accounting principles, except in cases of commercial undertakings of government departments.

The government accounting rules have been framed under the Constitution by the ministry of finance on the advice of the CAG.

The accrual system will address issues of improved disclosure norms for government debt, subsidies, off-budget government borrowings, contingent liabilities and revenue exemptions granted by the government.

Current accounting rules permit practices like booking of transactions temporarily under "suspense" heads. But these exceptions have been misused, affecting the quality and completeness of accounts. GASAB was established by CAG in August 2002 as an advisory body chaired by the Deputy Comptroller-and Auditor-General.

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Cash Deal

Government accounting in India is predominantly on cash basis, with very little correspondence with private sector accounting principles, except in cases of commercial undertakings of government departments

The government accounting rules have been framed under the Constitution by the ministry of finance on the advice of the Comptroller and Auditor-General of India