Handbook On Accounting Procedures For RD Institutions

SIRD
Mizoram
Accounting Procedures
for Rural Development
Establishments
Based on Ministry of Rural Development Guidelines 2001
Including basics of Tally 9 for computerised accounting
LALDINLIANA
From the Writer’s Desk
I want to go back to the time when

”getting high” meant “on a swing”
When “drinking” meant “apple juice”
When “dad” was the only “hero”
When “love” was “mom’s hug”
When “dad’s shoulder” was “the highest place”
When your “worst enemies” were your “siblings”
When the only thing that could “hurt” were “skinned knees”
When the only things “broken” were your “toys”
When “goodbyes” only mean “till tomorrow”
This was a small piece of work, embalmed with child-like wishes texted by a very dear
friend. Life has become more intricate as days rolled by. Some, complexed by choice and
some, by eventualities. In some instance, science itself convoluted some aspects of art and
knowledge. I believe accountancy, with all for the purpose of educational curriculum
fulfillment, is made more sophisticated in textbooks than in practice. With effort, the science
of accounting can be made simpler and less-demanding, easy to be grasped by lay person.
The rationale of this handbook is to eliminate the accountancy-phobia so deeply carved in the
paradigm of many. The concept of accounting can be simplified, explained away with „lefts
and rights‟ without going into the orthodoxy of the basics. The handbook may be an
instrument to do away with the phobia, bringing the subject easier to comprehend for the non-
accounting layman.
2
CONTENTS
PART ONE:
ACCOUNTING GUIDELINES OF MINISTRY OF RURAL DEVELOPMENT (2001)
Chapters Page
Introduction
1. General Guidelines
2. Maintenance of Cash Book
3. Maintenance of Scheme Ledger
4. Maintenance of Block wise and VC Payment Register
5. Maintenance of Receipt Register
6. Re-Appropriation
7. Guidelines for Payment
8. Procedure for Bank Reconciliation
9. Coordinate functions of Banks with DRDAs
10.Guidelines for Cheque Books
11.Guidelines regarding permanent imprest
12.Guidelines for auditing the accounts of DRDA
13.Guidelines regarding selection of CA Firm
14.Guidelines regarding sending reports
15.Duties and responsibilities of Project Director
16.Duties and responsibilities of various wings of DRDAs
17.Guidelines for Annual Financial Statements
18.Monthly Statements to be prepared by DRDAs
19.Summary of Accounting Records
20.Government of India Decision No.6 under GFR 149
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PART TWO:
ACCOUNTING PROCEDURES
Chapters Page
1. Double Entry System

2. Calculation of Depreciation
3. Cash Book
4. Ledgers
5. Receipt and Payment
6. Income and Expenditure Account
7. Balance Sheet
8. Prescribed Format
9. Financial Management Practice
PART THREE:
USING TALLY FOR COMPUTERISED ACCOUNTING

Chapters Page
Introduction to Tally
1. Creating Organization Profile
2. Creating Ledgers in Tally
3. Creating Groups for Ledgers
4. Accounting Receipts
5. Accounting Payment
6. Contra Entry
7. Altering the Organization Profile
8. Alteration of Ledgers
9. Alteration of Transactions
10.Viewing Income and Expenditure Account
11.Viewing Balance Sheet
12.Easy Reckoner 121
4
As per Government Notification dated Aizawl 11th February,
2008 No. B.11016/10/2001-RD(Acct), all accounts of DRDAs,
RD Blocks and other establishments of Rural Development
Department are advised to maintain double entry system with
effect from 1st April, 2008
5
ACCOUNTING GUIDELINES OF
MINISTRY OF RURAL DEVELOPMENT
(2001)
 General Guidelines
 Maintenance of Cash Book
 Maintenance of Scheme Ledger
 Maintenance of Block wise and VC
Payment Register
 Maintenance of Receipt Register
 Re-Appropriation
 Guidelines for Payment
 Procedure for Bank Reconciliation
 Coordinate functions of Banks
with DRDAs
 Guidelines for Cheque Books
 Guidelines regarding permanent
imprest
 Guidelines for auditing the
accounts of DRDA
 Guidelines regarding selection of
CA Firm
 Guidelines regarding sending
reports
 Duties and responsibilities of
Project Director
 Duties and responsibilities of
various wings of DRDAs
 Guidelines for Annual Financial
Statements
 Monthly Statements to be
prepared by DRDAs
 Summary of Accounting Records
 Government of India Decision No.6
under GFR 149
6
INTRODUCTION
The Ministry of Rural Development sponsors many schemes under the Poverty Alleviation
and Rural Employment Schemes such as Swaranjayanti Gram Swarozgar Yojana (SGSY),
Jawahar Gram Smiridhi Yojana (JGSY), Indira Awaas Yojana (IAY), and Employment
Assurance Scheme (EAS). In the Social Sector, the Ministry has been sponsoring National
Old Age Pension Scheme, National Family Benefit Scheme and National Maternity Benefit
Scheme. The schemes namely Accelerated Rural Water Supply Programme and Central Rural
Sanitation Programme are part of Department of Drinking Water Supply. The Department of
Land Resources is handling the Integrated Wastelands Development Programme, Desert
Development Programme, and Drought Prone Areas Programme for the development of Land
Resources in the country.
There are 571 district in India and the central share as well as the state share are released
directly to the District Rural Development Agencies (DRDA.s), Zila Panchayats(ZP.s)
and District Level Committee on NSAP(DLC on NSAP). The percentage of funds
provided by the Central Government varies from 50% to 100% from scheme to scheme. In
the case of Union Territories, 100% of the expenditure is borne by the Government of India.
The schemes are implemented through the DRDA.s/ZP.s/DLC on NSAP. The DRDAs are
autonomous bodies set up under the Societies Registration Act. The Accounting Procedure
which was earlier approved by the Comptroller and Auditor General (C & AG) for the Small
Farmer‟s Development Agency Programme (SFDA) was extended to the erstwhile scheme of
Integrated Rural Development Programme (IRDP) now known as SGSY mutatis mutandis
pending the formulation of detailed accounting procedure for the IRDP.
Based on the recommendations of an inter-ministerial working group a revised accounting

procedure was drawn up in 1984 and was approved by the C & AG of India. The main
modifications brought about in the revised procedure for SFDA and approved for the DRDA
in 1984 provided that:
(i) The accounts should be maintained on commercial principle on Double Entry System.
(ii) The Agencies should maintain annually among others the following:
(a) Receipt and Payment Account
(b) Income and Expenditure Account
(c) Balance Sheet
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(iii) There should be an audit by a Chartered Accountant or any other recognised body of
the Accountants every year and
(iv) There should be test audit by the C&AG of India.
(v) Provision was made for the maintenance of Block wise accounts through the Cash
Book.
(vi) A uniform format was prescribed for Subsidy Register as well as the Cash Book.
(vii) Specific time limits were incorporated for compilation and submission of annual
accounts. The annual accounts are to be compiled by the DRDA by 30th June. After
approval by the Governing body the accounts shall be got audited by the Chartered
Accountants or any other Auditor as envisaged under the Rules by 31st August. A
copy of such Audit Report along with annual statement of Accounts certified by the
Auditor and the Chairman of the Agency shall be furnished simultaneously to the
Government of India and the State Government not later than 30th September.
(viii) A standard format for furnishing Utilisation Certificate was prescribed.
(ix) Powers of Project Officer/Project Director for signing cheques fixed at 10,000/- and
was subsequently raised to Rs.50,000/-.
(x) A charter of duties and responsibilities of the accounting wing of the DRDA was
suggested.
The Study Teams of CCA.s Wing carried out the study of accounting practices followed by
the DRDA.s of 100 districts during the years 1998-99, 1999-2000 and 2000-2001. The study
group of National Institute of Financial Management had also submitted their project report
on the delivery of funds by the Ministry Rural Development to the Implementing Agencies.
Based on the feedback received from these study teams, the need for modifying the
Accounting Procedure was felt and following important amendments have been incorporated
in the Accounting Procedure 1984:
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(1) The accounts of the DRDA.s/ZP.s/DLC on NSAP and Block shall be
maintained on Accrual basis/Double entry basis.
(2) Multiplicity of Bank Accounts for one scheme is not permissible. Scheme-
wise accounts shall be opened in the Nationalised/Cooperative/ Regional
Rural Banks and funds received in common Bank Account from the Govt. of
India and State Governments shall be transferred to the scheme wise bank
account only.
(3) DRDA.s/ZP.s/DLC on NSAP and Blocks are required to maintain Scheme-
wise Cash Book. Name of the bank and Account number should be written on
the first page of the Cash Book.
(4) Funds are not allowed to be diverted from one scheme to another or from the
Central Scheme to State Scheme by DRDA/ZP/DLC on NSAP.
(5) Funds transferred to BDO.s, to Panchayats and/or to other implementing
agencies shall be reflected as advance to them and may be adjusted against the
receipt of adjustment Bills from them.
(6) Interest earned on funds of each scheme should be added in the scheme funds.
(7) The Comptroller and Auditor General shall have the right of superimposed
audit of the accounts of the society, and for this purpose, shall have the right
of access to the books and other relevant records of the society. Copy of the
annual accounts along with the audit report and comments of the agency
thereon shall be sent to the audit office.
(8) Funds received both for Central as well as State Share for Rural Development
Schemes and National Social Assistance Programme Schemes i.e. NOAPS
and NFBS should be kept in a Savings Bank Account in a Nationalised
/Cooperative/ Regional Rural Banks. Funds in no case be kept in the
Fixed Deposits/Term Deposits.
(9) The Powers of the Project Director for signing cheques have been raised from
Rs.50,000/- to Rs. 1,00,000/-. Any cheque beyond this limit should be signed
by both the Project Director and the Executive Director.
(10) The Central Schemes being implemented through District Level Implementing
Agencies (DRDA, ZP, DLC on NSAP) will be subject to the Internal
Inspection by the Ministry of Rural Development, Govt. of India.
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(11) The Annual Financial Statements should be accompanied by the Schedules of
Grants/Subsidies received, Interest Earned on unutilized funds kept in Banks,
Establishment Expenses, Other Administrative Expenses, Expenditure on
Grants and Subsidies and Schedule of assets created during the year.
(12) DRDAs/Blocks should maintain a register of the Permanent and Semi

Permanent assets acquired wholly or mainly out of Government Grants. The
Register should be maintained separately in respect of each scheme. A list of
annual assets acquired should be sent to the State Government and Ministry of
Rural Development as Schedule of Annual Financial Statements.
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CHAPTER- I
GENERAL GUIDELINES (Accounting System)
In pursuance of the provision made under rule 31 of the Rules of the Small Farmers
Development Agency/Marginal Farmers and Agricultural Labourers‟ Development Agency
(now DRDA) the following arrangement is prescribed in regard to maintenance of Accounts
by the Society (DRDA), ZP.s and DLC on NSAP as also the nature of inspection and audit to
be applied there on. In states where the DRDAs have been merged with the Zila Panchayats,
these guidelines would be applicable even in such Zila Panchayats for DRDA Accounts or
Rural Development Schemes accounts maintained by them. Similarly, in states where
DRDAs are no longer implementing agencies and are existing only for monitoring of
schemes these accounting procedure shall be implemented by such DRDAs for effective
progress and monitoring of schemes. Wherever the State Government.s accounting procedure
are inconsistent with the Accounting Procedure mentioned in the subsequent paragraphs, the
State Government may amend such rules so as to make them consistent with these accounting
procedures.
DRDA.s/ZP.s and Blocks are responsible for the correct accounting of money distributed to
the implementing agencies. They are supposed to supervise and control the whole accounting
functions of Blocks/Panchayats. Project Directors/CEOs are supposed to carry out essential
checks indicated in Chapter XV.
The accounts of the each District Rural Development Agency (DRDA)/ZP/DLC and Block
shall be maintained on accrual basis/double entry system like other commercial organisation.
DRDA.s/ZP/DLC/Block & Panchayats should maintain a consolidated Receipt and Payment

Account register common for all schemes on the basis of Pass Book, Cash Transaction as
recorded in the Cash Book and posted in Ledger. This consolidated information should be
made available to Inspecting Officers and Audit parties.
Interest earned on funds of each scheme should be added in the scheme fund. Income and
Expenditure Account should depict the same separately.
11
Principal of one Bank account for each scheme must be followed by DRDA and line level.
Second Bank Account for the same scheme, if at all required could only be opened with the
approval of the State Secretary (RD). Multiplicity of Bank Accounts for one scheme is not
permissible.
The Ministry of Rural Development will telegraphically transfer funds/grants relating to all
the schemes in a Common Bank Account opened by the DRDA/ZP in SBI or its associate
Bank. The Telegraphic Transfer message would contain the name of the scheme under which
the funds have been remitted. The DRDA/ZP should transfer the amount so received
immediately to the respective Scheme Accounts so maintained.
Funds received both from Central and State Governments should be kept in the Savings
Bank Accounts only. Funds in no case should be kept in the Fixed Deposits/Term
Deposits. All existing FD.s/TD.s should be encashed and transferred to the respective
scheme account.
Scheme Account should be maintained only in .Nationalised/Cooperative/ Regional Rural

Banks. In no case funds are to be kept or transferred in Treasuries, or in Personal Ledger
Account, Treasury Savings Accounts, Treasury Public Deposit Account etc.
State Share received against each scheme should also be transferred in the respective scheme
account maintained in the Banks. No funds should be kept in Treasuries.
Funds transferred to Block Development Officers/Implementing Agencies shall be reflected

as advance to them and be adjusted against the receipt of adjustment bills. Second advance
for the same project can be given subject to the condition that 60% funds have been
utilized/expenditure incurred out of advance already issued. However third advance cannot be
given till the first advance is fully settled.
Advances to BDO should be shown as advance in the Cash Book and Balance Sheet and not
as final Expenditure on the scheme.
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Expenditure on the scheme should be on the basis of adjustment bills or on receipt of the
utilisation certificates.
DRDA.s/ZP.s should prepare following Scheme-wise Annual Statements as per Chapter
XVII:
i) Receipt and Payment Account
ii) Income and Expenditure Account
iii) Balance Sheet
iv) Utilisation Certificate
v) A statement of Annual Opening and Closing Balance of each Scheme.
vi) A certificate of Imprest adjustments at the end of Financial Year.
Payments to state P.W.D., Forest Department and to other Implementing Agencies for
various works may be termed as Deposit works for which separate accounts may be kept and
executing agency shall render the account of each deposit and expenditure against such work
every month to the DRDA/BDO.s as the case may be.
The DRDA.s Accounts Officer shall acknowledge the receipt of funds received from the
Banker of the Ministry. The acknowledgement receipt should reach to the Pay and Accounts
Officer, (Special Cell), Ministry of Rural Development, Room no. 548, Krishi Bhawan, New
Delhi-110001 within seven days of the receipt of funds.
Subsidies from SGSY scheme fund should not be released by the lead Bank / DRDA to
branches before the receipt of the intimation from the branch bank confirming that the
loan release cases of the beneficiaries have been processed and sanctioned. Thereafter
subsidy equal to sanctioned amount should be released on monthly basis. Instances of
refund of unutilized subsidy by the bank branches may be reduced to the minimum.
DRDA.s are not authorised to take overdraft from the Banks. No overdraft at any stage be
paid to DRDAs on behalf of any scheme of Govt. of India. Bank should not entertain any
such request as Government of India is not liable for such payment.
Flow of funds from DRDAs/ZPs/Blocks/Gram Panchayats and Implementing Agencies

should be through cheque/Demand Draft only.
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CHAPTER II
Maintenance of Cash Book
The DRDA/ZP/DLC in NSAP are required to maintain separate Cash Book for each Scheme.
Against each entry in the cash book, name of the block and implementing agencies should be
indicated. The Cash Book shall be maintained by all the District Rural Development
Agencies. The transactions relating to schemes of other Ministries should not be included in
these Cash Books.
Like DRDA.s each Block is required to maintain separate Cash Book for each scheme. The
transactions relating to schemes pertaining to other Ministries should not be included in these
Cash Books.
The name of the Bank and the Bank Account no. of the Scheme should be written on the first
page of the Cash Book as it will be useful to the Inspecting Officers and Audit Officers.
Cash Book shall be closed on every transacting day. All receipts and payments should be
posted in the Cash Book on regular basis. After balancing the amount it should be signed by
the Cashier and DDO.
The Cash Book should be certified, summerised, closed and signed on the last working day of
the month by the Project Director, DRDA/ CEO, Zila Panchayat/DLC on NSAP.
All receipts of money should be entered in the Cash Book on the day they are received.
Interest Earned on scheme fund should also be reflected in the Cash Book.
The monthly closing balance should have details of Balances available in the Bank Pass
Book, entries in the Cash Book and Cash in Hand. Balance should also be supported by
the copies of Bank Pass Book. A certificate in this regard should be recorded at the close
of every month. There may be some debits and credits for Bank charges, commission or
interest, which may appear in the Monthly Bank statement. These items should be
incorporated in the Cash Book in the following month so that Cash Book balances agree
with the Bank Balance.
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CHAPTER III
Maintenance of Scheme Ledger
Each DRDA/ZP/DLC on NSAP should maintain Scheme wise Ledgers. Different pages of
Ledgers should be for different Blocks. Thus there will be numbers of ledgers equivalent to
the number of Schemes in the District and each Ledger will have detail of Blocks, date of
release of Advance, Amount of Advance released, voucher number, cheque number and date
of receipt of UC.s/Adjustment Bill.
At the end of the month a scheme-wise abstract should be prepared showing Monthly
Advances and the monthly adjustment/expenditure in respect of each scheme and each Block.
Each Block should maintain a Scheme wise Ledger with different pages for different
Panchayats, under which name of the Panchayats/Village, date of release of Advances,
Amount of advance, Cheque number and date of receipt of UC.s/Adjustment Bill should be
given.
At the end of the month a scheme wise abstract should be prepared showing the release and
monthly Expenditure in respect of each scheme in each Panchayat. This monthly abstract
should reach to DRDA.s in the first week of subsequent month.
Trial Balance for the month using General Ledger and Cash Book should be prepared. If Trial
Balance is not tallied then error of posting in Cash Book and Ledger should be checked.
15
CHAPTER IV
Maintenance of Block wise and
Panchayat wise Payment Register
Each DRDA/ZP/DLC on NSAP should maintain Block wise Payment Registers. Different
pages of the register should be allocated for different schemes. Thus there will be number of
registers equivalent to the number of Blocks in the District and each register will have detail
of Schemes, date of release of Advance, Amount of Advance released, and date of receipt of
UC.s/Adjustment Bill.
Block wise register should be closed on monthly basis along with progressive expenditure of
each month.
Each Block should maintain Panchayat wise Payment Register. Different pages of register
should have detail of different schemes. The register should have name of the scheme, date of
advance, amount of advance, and detail of adjustment bill.
Panchayat wise register should be closed on monthly basis along with progressive
expenditure of each month. Each Panchayat should maintain payment register
16
CHAPTER V
Maintenance of Receipt Register
For DRDAs
Each DRDA/ZP/DLC on NSAP should maintain a Consolidated Receipt Register indicating

name of the scheme, amount received, sanction no., date of receipt of funds and source of
receipts of funds i.e. Govt. of India, State Government, Others etc.
The Register should be closed each month and abstract should be prepared indicating the total
receipt during the month.
For Blocks
Each Block should maintain a Consolidated Receipt Register indicating name of the scheme,
amount received, sanction no., date of receipt of funds and source of receipts of funds i.e.
DRDA, others etc.
For Panchayats
Each Panchayat should maintain a Receipt Register indicating name of the scheme, amount
received, sanction no., date of receipt of funds and source of receipts of funds i.e. DRDA,
Blocks, others etc.
17
CHAPTER VI
Re-appropriation
If any grant has been made by the Government of India or by the State Government of India
or by the State Government to the Society for a specific purpose, the society shall not without
the prior sanction of the granting authority, appropriate such grant or sum or any part thereof
for a purpose other than the approved purpose i.e. Funds are not allowed to be diverted from
one scheme to another scheme or from Central Scheme to State Scheme.
In no case funds are allowed to be diverted from one scheme to another scheme or from
Central Scheme to State Scheme.
Unutilised funds under any head/scheme should be reflected as ‘Opening Balance’ in

the next financial year. PD, DRDA/CEO, ZP should sign the Annual Closing and
Opening Balance Statements.
Reappropriation of funds from one district to another district of the state is not allowed.
18
CHAPTER VII
Guidelines for Payments
BDOs/Implementing Agencies will receive their funds from DRDAs/ZPs as advance and
adjustment bills should be submitted to DRDAs/ZPs to settle the advance. There is no limit
on reimbursement, however second advance for the same project can be be given subject to
the condition that 60% funds has been utilised/expenditure incurred out of advance already
issued. However, third advance cannot be given till the first advance is fully settled.
All payments exceeding Rs.1,000/- shall be made in Cheque/DD, in cases where it is not
possible to make payment by Cheque/DD then such reasons should be recorded in the Cash
Book. The Drawing and Disbursing Officer will satisfy himself about the mode of payment.
All payments should be supported by documents such as bills/receipts and cash memos.
When disbursing the payments, the Accountant/Accounts Officer should obtain the signature
of the payee acknowledging receipt of the cheque or cash as the case may be. This signature
must be affixed in appropriate space.
All paid vouchers be retained for the period of 5 years from the date of
adjustment/settlement of Advance, or till the Statutory Audit for that period is completed,
whichever is later.
Bills and Vouchers which have been paid by cheques shall be divided into the following
classes, namely (I) salary and establishment Bill and (ii) other bills. Each class of bills should
be pasted in a separate guard file and shall be consecutively numbered in order of payment.
But sub-vouchers which have been paid in cash out of the permanent advance, shall be
separately filed together with the recoupment vouchers covering them.
A system of debit voucher for each payment (whether by cheque or in Cash) may be
introduced. The debit voucher may indicate sanction number, particular of expenditure,
ledger head under which it is classified and mode of Payment (Cheque/DD/Cash). The debit
voucher may be approved by the Accounts Officer and shall form the basis for posting the
Cash Book. Payment made to Blocks/ Panchayats and Other implementing agencies be
entered in Payment Register.
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CHAPTER VIII
PROCEDURE FOR BANK RECONCILIATION
The DRDA.s/ZPs and Banks should reconcile their accounts on monthly basis. Pass Book
should be updated twice in a month i.e. on 10th and last working day of every month. The
Bank Reconciliation Statement should be pasted in the Cash Book at the end of each month.
The Balance appearing in Pass Book/Bank Statement should be reconciled with entries
shown in Cash Book. In the event of any cheques issued during a month remaining uncashed
at the close of the month, there will necessarily be a difference between the balance
brought out in the Cash Book and of the Pass Book and of the certificate issued by the
Agency of the Bank under rule 10. This difference shall be explained by a note in the
last page of the Cash Book for the month in the following manner.
At the end of each Month a summary of the outstanding cheques issued but not presented to
Banks should be prepared indicating date, cheque no., amount and Payees name.
Cheques older than 6 months from the date of issue and not presented to the Bank should be
investigated by the PD/CEO,ZP and then written back in Cash Book noting the reference
20
number, date of payment voucher and head of Accounts liability for payment in future after
following the procedure laid down in Chapter VIII.
All moneys remitted to the Bank to the Credit of the Society and all payments made by the
Bank on cheques or otherwise on account of the society shall be entered in a Pass Book. The
Pass Book shall remain in the custody of the Accounts Officer and it shall be sent to the Bank
at least twice in a month. The Bank should update entries of Receipt and Payment, balance
the account and sign the Pass Book. The amount should be entered in words as well as in
figures. On receipt of the Pass Book by the Bank, the receipt and payment up to date, shall be
entered therein and when the Book is received on the last working day of the month, the
account shall be balanced and signed by the Agent of the bank, the amount being entered in
words as well as in figures. The Pass Book shall be returned to the Office of the Society
(DRDA) as soon as the entries prescribed in this rule have been made in it.
The Project Director/CEO,ZP shall examine the Pass Book at least once in a month and shall
immediately call the attention of the Bank to any discrepancy that may appear between the
credits and debits shown in the Pass Book and these shown in the accounts of the Society.
21
CHAPTER IX
Coordinated functions of Banks with DRDAs/ZPs/DLC
Funds received both for Central as well as State Share for Rural Development Schemes and
National Social Assistance Programme Schemes i.e. NOAPS and NFBS should be kept in a
Savings Bank Account in a Nationalised /Cooperative/ Regional Rural Banks. Funds in no
case be kept in the Fixed Deposits/Term Deposits.
The Bank should immediately intimate to the DRDAs/ZPs about the receipt of Telegraphic
Transfer (TT) of funds. On receipt of such intimation, the Project Director shall immediately
send the pass book to the bank for making necessary entries in the Pass Book.
The bank should credit the accounts of DRDA/ZP on the day of receipt of TT. The accredited
bank will be liable for penal interest for delay (in terms of no. of days) in crediting the
accounts of DRDA/ZP. In case of repeated instances of delay, the matter should be referred
to this Ministry and with prior approval, the account in such Bank should be closed and a new
SB Account should be opened in other Branch of SBI or its Associate Banks.
Interest earned on funds of each scheme should be added in the scheme fund. The bank shall
intimate in writing to the Project Director about the amount of interest earned so that
necessary entries are made in the Cash Book maintained by the DRDA/ZP.
Banks should confirm the DRDA/BDO.s that loan release cases of the beneficiaries have
been processed and sanctioned. Thereafter, subsidy equal to sanctioned amount should be
released to the Bank on monthly basis. Instances of refund of unutilised subsidy by the bank
branches may be reduced to the minimum.
DRDA.s/ZPs are not authorised to take overdraft from the Banks. No overdraft at any stage
be paid to DRDAs/ZPs on behalf of any scheme of Govt. of India. Bank should not entertain
any such request as Government of India is not liable for such payment.
22
In case of non receipt of TT.s by the bank, the banker as well as the Project Director should
immediately contact Asstt. General Manager, State bank of Bikaner & Jaipur, G-72, 1st
Floor, Connaught Place, New Delhi-110001, (Telephone No. 011-3358464, 3712083,
3719044 Fax: 3712081, 3713994) the accredited bank of the Ministry of Rural Development,
Govt. of India and the Pay and Accounts Office whose address and telephone no. is also
given in the sanction order.
On the receipt of „Sanction Order‟ from the Ministry of Rural Development, the Project
Director should contact the Bank to ensure the receipt of funds through TT, necessary credit
by the Bank in the accounts of DRDA/ZP and for making necessary entries in the Pass Book.
23
CHAPTER X
Guidelines for Cheque Books
Cheque books will be supplied by the Bank only; and no other forms shall be used. The
cheque books and the counterfoils/record slips of used cheques shall be kept in the custody of
the Accounts Officer/Project Director for audit.
On receipt of cheque book from the bank, the Project Director shall count the cheques and
shall record on the back of the cheque book that .this cheque book contains...... forms. The
cheque books will also be entered in the register meant for the purpose.
Cheques for sums not exceeding Rs. 1,00,000/- shall be signed by the Project Director,
DRDA/ZP. Cheques for sums exceeding Rs.1,00,000/- will be signed both by the Project
Director,DRDA and Executive Director,DRDA. At Block Level the cheques for more than
Rs.50,000/- should be signed by two Gazetted officers including BDO.
No cheque shall be signed unless required for immediate delivery to the person to whom the
money is to be paid, nor until the Bill which it will discharge, has been presented in a
complete form, examined and passed for payment.
If a cheque, after it has been signed cannot be delivered to the payees on account of his non-
appearance on a particular date, it should be lodged in an Iron safe; the key of which should
be kept in the custody of the Accounts Officer.
In case of Lost Cheque, on intimation of such loss from the Payee, the drawee bank should be
asked to provide ‘Non Payment Certificate’. The Payee should be asked to execute an
Indemnity Bond for an amount equal to the cheque lost. Only then a fresh cheque should be
drawn in favour of the payee.
In case of time barred cheques, fresh cheques are required to be issued on receipt of request
and no revalidation shall be resorted to. The time barred cheque should not be destroyed but
24
preserved as a voucher/sub-voucher and fresh cheque should be issued on this basis. To avoid
misuse of cancelled cheque the word „VOID‟ should be written over the leaf.
Every payment made, either in cash or by cheque, shall be covered by a receipt stamped if
necessary, signed by the person to whom the money is due and to whom it has actually been
paid.
All accounts received in cash or cheque/Draft will be acknowledged by printed receipts

which will be signed by the Drawing and Disbursing Officer or other person authorised to
work on his behalf. The receipts with their counterfoils will be machine numbered and their
record will be kept in the receipts register.
Counter foils/Record Slips of cheques should bear payees name, amount, the date of issue,
voucher number and the initials of the signatories.
All cheques other than Self Cheque should be a Crossed Cheque/Account Payee Cheque and
in no case a Bearer cheque should be issued.
25
CHAPTER XI
GUIDELINES REGARDING PERMANENT IMPREST
In order to carry out Contingency Nature, Petty cash payment of miscellaneous nature,
a Permanent Impress of Rs.5,000/- may be sanctioned and paid to any Gazetted Officer
of the office of the DRDA/ZP for a specific purpose or for petty contingent transactions.
Permanent Imprest Account shall be submitted by the imprest holder at least once in a
month and get the amount recouped.
All Permanent Imprest must be adjusted at the close of the financial year i.e. 31st of
March every year or at the time of relinquishing the charge by the Imprest Holder due
to retirement/transfer etc.
In case the Imprest Holder does not submit any Account for three months continuously,
he shall be asked to render the account for adjustment failing which further imprest
should not be allowed.
The Permanent advance fixed as per the State Government Rules /General Financial
Rules shall be recouped as often as may be necessary in the following manner:-
The Project Director/Accounts Officer shall compare the sub-vouchers with the entries in the
permanent advance account. He shall deface them by stamping „Cancelled‟ thereon so that
they cannot be used again. He shall total and initial the column. Amount of sub- voucher. in
the permanent advance account. The voucher for recoupment shall be drawn out, in a suitable
form and it shall be enfaced with the usual payment order. The Project Officer shall draw out
a cheque in own favour for the amount.
26
CHAPTER XII
GUIDELINES FOR AUDITING THE ACCOUNTS OF DRDA/ZP
The Comptroller and Auditor General shall have the right of superimposed audit of the
accounts of the society, and for this purpose, shall have the right of access to the books and
other relevant records of the society. Copy of the annual accounts along with the audit report
and comments of the agency thereon shall be sent to the audit office.
The Annual Accounts of the DRDA.s/ZP.s/DLC on NSAP, Block and selected Gram
Panchayats shall be audited by the Chartered Accountant or by the Local Fund Audit
Department, A copy of their Audit Report should also be sent to the respective
Accountant Generals (AGs), State Governments and Programme Divisions in the
Ministry of Rural Development, Govt. of India.
The Chartered Accountant or Local Fund auditor shall have access to the Record of DRDAs,
Zila Panchayats, Blocks and Gram Panchayats. They must physically certify and sign the
accounts so audited. Chartered Accountant must audit offices of DRDAs/ZPs/DLCs and all
blocks and selected Gram Panchayat.
The Project Director shall ensure that, the annual accounts of the agency are prepared by a
date not later than 30th June comprising of Receipt & Payment Account, Income and
Expenditure Account and Balance Sheet. After approval by the Governing Body he shall
have the accounts audited by the Chartered Accountant or by the Local Fund Audit
Department.
A copy of such audit report (duly signed by auditor) along-with the annual statement of
accounts certified by the auditor and the C.E.O. of the Agency thereon shall be furnished
simultaneously to Government of India and the State Government before 30th September.
The Central Schemes being implemented through District Level Implementing

Agencies/ZP.s may be subject to the Internal Audit by the Ministry of Rural
Development, Govt. of India and State Government Teams.
27
CHAPTER XIII
Guidelines regarding Selection of Chartered Accountant Firms
Preference should be given to select an experienced Chartered Accountant listed in the panel
of A.G.s of the State or C & A.G. of India. However, in areas where empanelled CAs are not
available or which are remote or inaccessible, the Local Fund Audit Party or any other
Chartered Accountant with Professional Qualifications prescribed by the respective State
Governments from time to time.
The C & AG of India shall have right to lay down some specific qualifications and
experience of Chartered Accountant for certain areas or in special cases.
The C & AG shall have right to issue directives to Chartered Accountants (CA.s) about each
audit.
Any professional misconduct on the part of the CA shall be reported to the Institute of
Chartered Accountant of India. CA shall be responsible for such action taken by the Institute
under the code of conduct as defined under provision contained in the Chartered Accountant
Act 1949.
The Chartered Accountant shall also be responsible for inviting attention of any material
departure from generally accepted procedure of Audit. Its failure shall be considered as
professional misconduct as defined under the Charted Accountant Act of 1949.
If the Ministry of RD, Government of India or State Government notices that Account
audited by any Charted Accountant is not up to the standard, incorrect, deviates from factual
ground realities, misrepresent the facts, etc. then the Ministry of Rural Development, Govt. of
India / State Government may debar such CA from audit and shall report against such
Chartered Accountant to the Institute of Chartered Accountants of India, New Delhi for
initiating action under their conduct rules.
28
CHAPTER XIV
GUIDELINES REGARDING SENDING REPORTS TO THE CENTRAL
GOVERNMENT
All DRDAs/ZPs should send following audited Annual Financial Statements to the M/O RD,
State Government and to the State AG by 30th Sept. of the subsequent financial years.
(a) Receipt and Payment Account

(b) Income and Expenditure Account
(c) Balance Sheet
(d) Audit Certificate of the Chartered Accountant
A Statement showing the Schedule of Fixed Assets created under each scheme held by the
Agency at the end of the financial year shall be sent to the State Government and to the
Government of India in the prescribed form. The value of assets should be shown at the
original cost in the accounts.
All DRDA.s/ZPs/DLC should send their Scheme wise Opening Balance as on 1st of April
brought forward the unspent balance of the previous year. The Report should reach to the
M/O RD, Budget Division by 30th May of each year. The Opening balance should include
unspent balances lying with the Implementing Agencies/BDOs/Gram Panchayats as on 31st
March.
All the Agencies shall send a Utilization Certificate to the Government of India (Ministry of
Rural Development) in the prescribed pro forma given in respective scheme guidelines along
with annual statement of accounts. The Utilization Certificate must be prepared strictly on the
basis of the Receipts and Payment Account and Opening / closing balances in both Receipts
and Payment Accounts.
As the existing Utilisation Certificates do not reflect reality, a complete list of completed and
incomplete works should be attached with the U.Cs. This should also show where the unspent
money is lying.
29
A compiled expenditure report on quarterly basis should be sent to the State Government and
the Ministry of Rural Development, Government of India. The Report should have Opening
Balance, Total Receipts (both from the Govt. of India and the State Government) and
expenditure under various scheme heads of accounts along with cumulative total at the end of
the quarter.
30
CHAPTER XV
Duties and Responsibilities of Project Director
In case PD/CEO is working as DDO, he shall sign all entries of Receipt and Payments made
in the Cash Book on each transaction day.
Closing Balance in the Cash Book along with certificate and summary of Monthly statement
is to be signed and dated by the PD/CEO.
Monthly Bank Reconciliation Statement shall be signed by the PD/CEO and pasted in the
Cash Book at the close of the each month.
PD/CEO shall examine the pass Book from time to time at least once a month and shall
immediately call attention of the Bank of any discrepancy noticed in the Bank Reconciliation
Statement.
Monthly review of Advances paid to various executing agencies/Implementing Agencies and

adjustment of bills thereon shall be carried out.
Monthly receipts and expenditure Statement should be signed. He should ensure that scheme
wise expenditure met in accordance to allocation.
PD/CEO shall be responsible for getting the Annual Accounts prepared, which shall include
Receipt and Payment Account, Income and Expenditure Account and Balance Sheet. He will
sign these before getting the same audited from the CA.
PD/CEO must sign all the UC.s being sent to the M/O RD along with annual statement of
Accounts.
PD/CEO must ensure that negative (-) balance does not come in the opening and Closing
Balances of each scheme.
31
PD/CEO while forwarding the proposal for II installment must issue a certificate that no
funds are kept in Fixed Deposit Receipts.
PD/CEO must ensure that Imprest Amount is adjusted at the close of every financial year
31st March.
PD/CEO must ensure that Opening Balance in each scheme is communicated to the Ministry
of RD, Govt. of India at the close of financial year latest by 30th May every year.
PD/CEO should maintain a watch on the expenses of Blocks with reference to the allocation
in different schemes.
32
CHAPTER XVI
DUTIES & RESPONSIBILITIES OF THE VARIOUS WINGS OF DRDAs/ZP
Establishment Wing:
The head of Establishment Wing should arrange and ensure proper maintenance of the
following records:
Preparation of Pay bills, TA bills, Contingent bills towards administrative expenses, their
scrutiny and submission to the Project Director for approval.
Maintenance of following Registers

(a) Pay bill register and Aquittance register.
(b) Loan register in G.F.R. form 20 (Share capital loan).
(c) Register of fixed charges.
(d) Traveling allowance Register.
(e) Service books of employees of the Society.
(f) Leave Salary and Pension contributions etc. of employees.
(g) Register of advances to staff and their recovery.
(h) Stock register of (a) Consumable articles; (b) non consumable articles.
Accounts Wing:
The Accounts officer or the head of the Accounts wing should arrange and ensure proper
maintenance of the following records:
Preparation of the budget estimates under different heads viz. Administrative expenses,
subsidy risk fund, etc.
Maintaining a watch on the expenses of blocks with reference to the allocation in different
scheme.
33
A system of debit voucher for each payment by cheque or in cash may be introduced. The
debit voucher may be approved by the Accounts Officer/Project Officer and form the basis
for posting the cash book/ledger.
Preparation of cheques for payments on the basis of the sanction/pass orders on bills or
approved debit vouchers.
Monthly Bank Reconciliation of balances as per the books of the Agency with the balances as
per the books of the banks in which the cash balances of the agency are kept.
To watch the receipt of funds from State and Central Government and to acknowledge the
receipt of funds to the Ministry of RD and the State Government as the case may be.
Preparation of monthly reports of expenditure under different heads, and different blocks for
comparison and review with budget allotments and Quarterly progress report to be sent to the
State Govt./ Govt. of India.
Quarterly Receipt and Expenditure Report to be sent to the State Govt./Govt. of India.
Preparing a consolidated register of all funds received from Central and State Government
and Block wise and Scheme wise Expenditure made.
Preparation of Annual Financial Statements for Audit as in Chapter XVII
Watching Adjustment Bills/ UC.s from the Blocks and Implementing Agencies for the
advance given to them and allowing subsequent advance.
Dealing with correspondence relating to audit objections and inspections reports till
they are finally settled.
Maintenance of the accounting records as given in Chapter XIX.
34
Assistant Project Officer
Scrutiny of subsidy claims made by Banks dealing with SGSY.
Watching the receipt of utilization reports and adjustment bills from the Banks/ Credit
Institutions in respect of subsidies advances made to them, within the stipulated period,
processing the adjustment to final heads making necessary entries in the Scheme-wise
beneficiary register; in the event of default, ensuring recovery of under-utilized subsidies and
interest thereon.
Register of subsidies Scheme wise, beneficiary wise (these registers may be kept separately
for each block).
Register to monitor and record the expenditure on subsidies in different blocks against the
block ceiling.
Register to review the progress of expenditure against the budget allotment for:
(i) Administrative Expenses under different Ledger heads
(ii) Expenditure on subsidies for different programmes in different sectors and Risk Fund/
Managerial Subsidy.
35
CHAPTER XVII
GUIDELINES FOR ANNUAL FINANCIAL STATEMENTS
The following annual Financial Statements shall be prepared by the DRDA/Agency for
each scheme.
Receipts and Payments Account

The summary of the Receipts and Payments should be tallied with the cash book. It has
following features.
(1) It starts with an opening balance on the debit side showing cash in hand and balance in
bank.
(2) Receipts are recorded on the debit side and payment on the credit side.
(3) Both receipts and payment are classified under suitable headings.
(4) All transactions occuring during the year shall be recorded in this account. In other words,
receipts and payments pertaining to the previous year, current year and next year are recorded
in it. Moreover it records receipts and payments of both capital and revenue nature.
(5) This account ends with a closing balance which represents cash in hand or bank balance at
the end of the year. If however, it shows a credit balance, it means it is bank overdraft.
Income & Expenditure Account

It is prepared on the principles of Profit and Loss Account of a Non-Profitable organisations.
Special features of the account are:-
(1) Expenditure is on the debit side of this account and Incomes are recorded on its credit
side.
(2) Items of only revenue nature are shown. Items of capital nature are excluded.
36
(3) Expenses and Incomes are adjusted in the following manner:-
i) Include all figures relating to the current year only even if the items are not fully
settled in cash and.
ii) Exclude figures relating to future or previous years.
iii) Interest earned on funds of each scheme should also be shown as Income.
Steps for preparing Income and Expenditure Account out of Receipts and Payments
Account:
For this purpose the following steps may be necessary
(1) Exclude the opening and closing balances of the Receipts and Payments Account.
(2) All items of capital nature recorded in the receipts and payments account should be
excluded.
(3) Any income and expenditure of the previous year or next year must be excluded.
(4) Any income earned but not received during the year should be provided for, similarly of
expenditure incurred but not paid should be recorded in.
(5) Items like depreciation, bad debits etc., which are not paid in cash, must be taken into
account.
(6) All items of capital nature appearing in receipts and payments account but not shown in
the income & expenditure account should be shown in the balance sheet.
37
Balance Sheet
i) The Balance Sheet must be prepared for every financial year

ii) The Balance Sheet should show all balance of Assets and Liabilities Account at
close of the year with the comparative figure for previous period.
iii) Accounts Officer and Project Director/CEO must sign the Balance Sheet, before
forwarding it either for audit or to Executive Committee.
iv) The necessary annexure to the balance Sheet should be numbered in sequence
and attached thereof.
v) The annual accounts along with Balance Sheet shall be subjected to Audit.
vi) The Audited Annual Accounts along with the Balance Sheet and Audit Report
should be sent to the Ministry of Rural Development, Government of India and
the State Government by the 30th September of next year.
Schedules:-
The Annual Financial Statements should be accompanied by the following Schedules:

(i) Schedule of Assets created during the year
(ii) Schedule of Grants/Subsidies received.
(iii) Schedule of Interest Earned on unutilised funds kept in Banks.
(iv) Schedule of Establishment Expenses (For DRDA Admn. only)
(v) Schedule of Other Administrative Expenses (For DRDA Admn. only)
(vi) Schedule of Expenditure on Grants & Subsidies
After the preparation of Annual Financial Statements, as mentioned above, the Project
Director shall lay them before the Governing Body for their approval.
Utilisation Certificate:
The DRDA/ZP/DLC shall submit utilization certificate along with Annual Statement of
Accounts. The Blocks and other executing agencies shall render their accounts against
advance given to them by the DRDA. The UC.s shall be signed by the PD/CEO.
38
CHAPTER XVIII
List of Monthly Statements to be prepared by DRDA/ZP/DLC.
DRDA.s/ZP/DLC shall prepare following monthly statements for each scheme.
1. Preparation of Bank Reconciliation Statement.
2. Monthly / Fortnightly review of Bank Pass Book.
3. Monthly Closing of Cash Book having Summary of Statement of Transaction.
4. Monthly closing of scheme wise ledger by the DRDAs indicating the advances given and
their adjustment made.
5. Monthly closing of Scheme wise and Panchayat wise Register by the DRDAs/BDOs
indicating summary of advances and their adjustment made.
6. Monthly closing of Receipt and Payment Register.
7. Summary of cheques issued but not presented in the Bank during the month.
8. Monthly Expenditure Statement.
39
CHAPTER XIX
Summary of Accounting Records to be maintained by the
DRDAs/ZPs
1. Cash Book
2. Ledger
3. Journal
4. Cheque Issue Register
5. Register of Receipt Books
6. Register of Cheque Books
7. Register of Advance Implementing Agencies
8. Register of risk fund/managerial subsidies Bank account register to record the cheques
issued against the balances in different banks and to work out the balance from time to
time.
9. Register to review the progress of expenditure against the budget allotments for (i)
administrative expenses under different ledger heads: (ii) expenditure on subsidies for
different programmes in different sectors; and (iii) risk fund/managerial subsidy.
10. Permanent advance Account (Petty cash book and recoupment vouchers).
11. Provident funds accounts if any for employees of the DRDA/DRDS, under the rules
of the society.
12. Register to record the recovery and remittance of (I) Provident Fund Contributions;
(ii) Income tax; (iii) Loans and Advances (iv) Register to watch the disposal of Audit
objections (A.G.‟s inspection, C.A.‟s audit).
13. Assets register in G.F.R. Form 19.
14. Bank reconciliation register with separate folios for the reconciliation of balances held
with different branches of the bank by the DRDAs.
15. Any other register considered necessary in connection with the work of maintenance
of accounts.
16. Register of Consolidated Receipt and Payment.
17. Deposit Register in a format to be maintained for EMD, Security Deposit and Income
Tax Deduction.
18. Scheme wise Ledger having Block wise Detail.
19. Petty Cash Book
40
20. Recoupment Register (for Imprest)
21. Register of Audit and settlement of Audit Objections
22. Block wise Scheme wise Register for watching Utilisation from BDOs/ Implementing
Agencies for amount advanced to them. The Register should show the following items
also:
(a) Funds advanced to the Blocks under different Schemes.
(b) Expenditure intimated by the Blocks against advances.
(c) Amount Outstanding against each BDO pending adjustment.
23. A monthly account showing the allotment and expenditure under each item, shall be
prepared and put up before the PD/CEO.
41
CHAPTER XX
GOVERNMENT OF INDIA DECISION NO 6 UNDER G.F.R. 149.
Disposal or utilisation for other purposes of assets acquired out of government grants not
permissible except with prior approval-(a) In making grants to non-government or quasi-
Government bodies or institutions, a condition should be laid down that assets acquired
wholly or substantially out of Government, shall not be disposed off; encumbered or utilised
for purposes other than those for which the grants were sanctioned. (G.I., M.F., O.M. No. F
ii(8)-E.ii(A)/60. Dated the 2nd February, 1960)
The following procedure should be observed in regard to assets acquired wholly or

substantially out of Government grants:-
(i) An undertaking should be obtained by the sanctioning authorities from the grantee
institutions that they ( the institutions)agree to be governed by the conditions of grants which
result in the creation or acquisition of permanent or semi-permanent assets.
(ii) The grantee institutions should maintain a register in Form A G.F.R. 19 of the permanent
and semi-permanent assets acquired wholly or mainly out of Government grants. The register
should be maintained by the grantee institutions separately in respect of each sanctioning
authority and a copy thereof furnished to the respective sanctioning authorities annually.
(iii) The sanctioning authorities should maintain block accounts also in form G.F.R. 19 of
permanent and semi permanent assets acquired wholly or mainly out of Government grants.
This record should be of a permanent nature and should be posted from the annual returns
furnished by the grantee institutions under (ii) above.
(iv) The register of assets and the Block Accounts, maintained by the grantee institutions and
the sanctioning authorities respective should be available for open to scrutiny by Audit. (G.I.,
M.F., O.M. No. F 11(8)-E II(A)/60,dated the 28th March, 1961).
Explanation: The term „assets‟ used in clauses (a) and (b) of this decision means (i)
immovable, property; and (ii) movable property of a capital nature where the value
exceeds Rs.1,000/- (G.I., M.F. O.M. No. F.II (14)- E-II(A)/62, dated the 29th June,1962).
42
NOTE: Library books and articles of furniture need not be taken as falling within the terms
.assets.. It is not, therefore, necessary to indicate such articles in Form G.F.R. 19. Inventories
of such articles in the prescribed form should nevertheless be maintained by the authorities
and produced at the time of audit.
43
ACCOUNTING TECHNIQUES
 Double Entry System
 Calculation of Depreciation
 Cash Book
 Ledgers
 Receipt and Payment
 Income and Expenditure Account
 Balance Sheet
 Prescribed Format
 Financial Management Practice
44
CHAPTER ONE
DOUBLE-ENTRY SYSTEM
Introduction
Double Entry is an old art, as old as business itself. In the 15th century, a Franciscan monk,
Lucas Pacioli described a method of arranging accounts in such a way that the dual aspect
would be expressed by a debit amount and an equal and offsetting credit amount.
There cannot be a transaction unless there are two parties involved in it. Every transaction
resulting in transfer of money, goods or services must imply existence of at least two parties,
one the receiver and the other the giver. Double entry therefore is the system under which
each transaction is regarded has two-fold aspects and both the aspects are recorded to obtain
complete record of dealings. Double entry adheres to the rule, without any exception, that for
each transaction the debit amount(s) must equal the credit amount(s). Double Entry implies
recording of a transaction in the books of the two parties involved. For example, if a cash
payment for Rent is seen on the Payment i.e. right-hand side of the Cash book, an entry of
Cash A/c should be made on the left-hand side of Rent A/c ledger for the same amount. If
there is a Receipt entry i.e. left-hand side in the Cash book from Government, there should be
a corresponding entry on the right-hand side in Government A/c ledger for the same amount.
In that way, there will be a record of two effects for one transaction and this is basically
called Double-Entry.
The advantages of double entry system may be seen as below:
1. It enables to keep a complete record of transactions

2. It provides a check on the arithmetical accuracy of the books of accounts. Based on
equality of debits and credits, the system provides the test whether at any point of
time the records are accurate or not
3. It gives the result of activities during the accounting period. By preparing Profit &
Loss Account (Income & Expenditure Account, in this case), surplus or deficit can be
ascertained
45
4. It tells the financial position of the organization at a point of time. Total resources of
the organization, items in which expended, claims of any outsiders or debts etc. are
revealed in the statement called Balance Sheet
5. It makes possible comparison of the current year with those of the previous years in
respect of purchase, expenses, revenues, grants, surplus, deficit etc. Such comparison
helped the officials to manage the organization‟s funds on better lines
6. It reduces the chances of errors in the accounting records because of its equality
principle
7. It helps to ascertain the details regarding any account easily and accurately
Basic Terminologies in Book-Keeping
 Assets: Anything of use to future operations of the organization and belonging to the
organization. E.g. Building, land, machinery, cash, vehicle, computer system etc.
 Liability: Amounts owed by the organization to the outsiders i.e. to all others except the
organization. E.g. Creditors, overdrafts etc.
 Current Asset: Those assets which can be converted to cash within a short period of time.
E.g. Cheques, cash at bank etc.
 Current Liability: Those liabilities which have to be repaid within a short period of time. Eg.
Outstanding expenses etc.
 Entry: The recording of transaction or event in the books of accounts is known as entry
 Net Worth: Also known as capital. It is the difference between total assets (-) liabilities.
 Book-keeping: It is the art of recording financial transactions and events in a set of ‘books’.
 Debit: Amounts entered on the left-hand side of a “T” Account is called debit and is
abbreviated as “Dr.”
46
 Credit: To make an entry on the right hand side is called credit and is denoted as “Cr.”
 Depreciation: Decrease in the value of assets from usage or super-session.

Straight-line method: Cost of asset – Scrap value
Estimated life
 Journal: A chronological record (in order of occurrence) of transactions showing the names
of accounts to be debited or credited and the amounts.
 Contra entry: In three column cash books, there will be some cross entries i.e. transfer of
money from cash to bank (amount deposited) and vice versa (amount withdrawn from bank
for office use). In such case, both entries occur in the cash book and no ledger entry is
required. ‘C’ is entered in both sides’ folio column.
 Cash Book: A subsidiary book of accounts where movements of cash are recorded. The left
hand side denotes receipt and the right hand side denotes payment.
 Ledger: Principal or chief books of accounts. They are literally books. The book which
contains all the accounts is called ledgers.
Ledgers should be created for every effect of transactions. While entering in ledgers,
payments will be entered in the debit side and receipts will be entered in credit side.
Therefore, if rent is paid, the amount Rs. *** will be entered in debit side. If bank interest is
received, the amount will be entered in the credit side of Interest A/c
47
CHAPTER TWO
CALCULATION OF DEPRECIATION OF ASSETS
Depreciation is the decrease in the value of assets caused by usage or supersession. Sound
accounting should be equitable spread over the useful life of asset.
Reasons for providing depreciation:

Depreciation has to be considered for the following reasons:
1. For replacement cost on the retirement of the original assets
2. To find out correct surplus for the years
3. To find out the correct financial position through balance sheet
Even though the Accounting Procedures Chapter XIV quoted “The value of assets should be
shown at the original cost in the accounts”, the same Guidelines Chapter XVII mentioned
where depreciation is to be treated while preparing Income and Expenditure Account.
Furthermore, General Financial Rules 2005 spoke of depreciation in Rule 91 (c), 202 (2) and
279 (3). In Appendix 1 of GFR 2005, the recommended percentage to be charged in case of
vehicles including cycles is 20% and 15% in case of calculating machines in case of the
Government property or equipment lost, damaged or destroyed by the carelessness of
individuals.
Calculation of depreciation of assets:
Depreciation expense is calculated utilizing either a straight line depreciation method or an

accelerated depreciation method. The straight line method calculates depreciation by
spreading the cost evenly over the life of the fixed asset. Accelerated depreciation methods
such as declining balance and sum of years digits calculate depreciation by expensing a large
part of the cost at the beginning of the life of the fixed asset.
The required variables for calculating depreciation are the cost and the expected life of the
fixed asset. Salvage value may also be considered. Examples of depreciation calculations for
both straight line and accelerated methods are provided below.
48
Straight Line Depreciation Method
The straight line depreciation method divides the cost by the life.
Straight Line = Cost / Life
Example:
A desk is purchased for Rs.487.65. The expected life is 5 years. Calculate the annual
depreciation as follows:
Rs. 487.65/ 5 years
= Rs. 97.53
Each year for 5 years, Rs. 97.53 would be expensed.
To determine the rate of depreciation to be charged when the obsolete asset can be sold as
scrap, the following formula has to be applied:
D= C –S/N
Where,
D = Rate of depreciation
C = Cost of asset
S = Scrap value
N = Expected life, say, in years
Example:
D = Rs. 10,000 – Rs. 100/15 years i.e. Rs. 660 (which is 6.60%) will have to be deducted as
depreciation every year for 15 years.
49
Sum of the Years Digits Method
The first step is to sum the digits or numbers starting with the life and going back to one. For
example, an asset with a life of 5 would have a sum of digits as follows: 5+ 4+ 3 +2 + 1 = 15
To find the percentage for each year divide the year's digit by the sum. In the example above
the percentage would be calculated as follows:
Year 1 5 / 15 = 33.34%
Year 2 4 / 15 = 26.67%
Year 3 3 / 15 = 20 %
Year 4 2 / 15 = 13.33 %
Year 5 1/ 15 = 6.67%
Example:
A conference table is purchase for 1,467.89. The expected life is 5 years. Since this is a 5
year asset the yearly factors have been calculated above.
Depreciation Depreciation
Year
Calculation Expense
1 1,467.89 X 33.34 % 489.40
2 1,467.89 X 26.67 % 391.49
3 1,467.89 X 20 % 293.58
4 1,467.89 X 13.33 % 195.67
5 1,467.89 X 6.67 % 97.91
50
CHAPTER THREE
CASH BOOK
Introduction
In all the Rural Development organizations and institutions under the Government of
Mizoram, the largest, or rather all of the transactions must relate to cash and bank. It is so
because every transaction must, ultimately result in cash. Therefore cash book have to be
well-maintained.
Cash book is a record of receipts and payments of cash including transactions relating to
bank. It is also technically called a book of original entry because cash and bank transactions
are not recorded in any other books.
Types of cash book
The type of cash book depends upon the nature and requirements of the organization. It may
be any one of the following:
1. Single column cash book (cash column)

2. Double column cash book (cash and discount columns)
3. Triple Column cash book (cash, discount and bank columns)
4. Bank Cash Book (bank and cash column)
For DRDAs and other RD Institutions, it is recommended to use Bank Cash Book as all the
activities involving monetary transactions relate to bank and cash.
51
Cash Book
These kinds of books are called „T‟ columns. Any regular stationery stores will be carrying
these kinds of books. All receipts and expenses, whether as cash, cheque or telegraphic
transfer, will be recorded in the cash book.
Illustration 1:
The following transactions are to be entered in DRDA Cash Book
Nov. 1 Balance of cash in hand Rs. 4,000/- and in bank Rs. 10,000/-
2 Received cash from Muana Rs. 1,000/-
3 Paid to the bank Rs. 2,000/-
4 Paid to D & Sons by cheque Rs. 320/-
5 Received cheque from Government Rs. 225/-
8 Drew for office use Rs. 900/-
11 Paid cash for advertisement Rs. 45/-
19 Paid salaries to staff by cheque Rs. 1,250/-
23 Paid rent Rs. 400/-
26 Purchase by cheque office furniture Rs. 375/-
30 Received Rs. 580/- in cheque from Government
52
Solution:
1. All receipts are to be entered on the left hand side of the book and all expenditures are
to be entered on the right hand side of the book.
2. All entries on the left hand side are prefixed with „To‟ and all entries on the right hand
side are prefixed with „By‟
3. Transaction using cheque is to be entered in the bank column
4. Note than on Nov. 8th, Rs. 900 was withdrawn for office use. That means the amount
is withdrawn from the bank account and is now in cash. As the Cash Book in use is
for recording all transactions of cash and bank, the amount with be entered as
expenditure in bank column and at the same time, will be entered as receipt in cash
column. This kind of transaction is called „contra entry‟ and the letter „C‟ will be
marked in both sides in Ledger Folio (LF) column.
5. Whenever it is desired to balance an account, the columns of the two sides are added
up and if the totals of the columns of the two sides are unequal, then the difference are
put on the side having lesser total. This will make respective columns of the two sides
equal. The amount of the difference inserted is known as „balance‟ of the account and
is written as Balance c/d (carried down). In the subsequent period, it is known as
Balance b/d (brought down)
53
DRDA Cash Book
Cash basis and Accrual Basis:
It can be noticed from the simple illustration that transactions are made as and when cash or
bank transaction takes place, irrespective of the time period for which the receipt or payment
is made. Suppose, the cashier paid newspaper subscription of Rs. 300/- for 3 years in
advance, this amount will be entered in payment/ disbursement side of the Cash Book as and
when it is paid. But then, the subscription goes beyond the current year, rather it is pre-paid
for the coming two years too. This principle is called „Cash Basis‟. Cash Basis uses the
system where incomes are considered to have been earned only when received and expenses
incurred only when paid actually.
On the other hand, „Accrual Basis‟ is the system where all incomes are credited to the period
in which earned irrespective of the fact whether received or not. Expenses are debited to the
period whether actually paid or not. This principle will be seen in Income and Expenditure
A/c later.
54
CHAPTER FOUR
LEDGERS
Introduction
Maintaining regular records in Cash Book may be quite sufficient for small organizations
with less transactions and stakeholders. However, for disbursing agencies like DRDAs, mere
Cash Book has its limitations, which are:
1. Cash Books of organization with large amount of transactions can be compared with a
store room where all sorts of items like bricks, sand bags, cement bags, nails and tools
etc. are thrown in at random. All items are kept there but everything is mixed and
jumbled up. It is almost impossible to know at a given moment just how many nails
and hammers are in the room, how many bricks are lying around and how many
cement bags are kept there.
2. As Cash Book follows the „Cash Basis‟ concept, it does not accurately give just how
much cash be accounted for the accounting year. It does not show just how much the
organization is liable as unpaid dues as these unpaid debts are still „unpaid‟ and thus,
does not shown in Cash Book.
Ledgers may simply be labeled as books. The books which account for all transactions of a
particular subject may be termed as ledgers. Technically, ledgers are referred to as the
„principal‟ or „chief‟ book of accounts. The first limitation can be dealt with by maintaining
ledgers.
Writing ledgers
In ledgers, we maintain accounts. Each account is allotted one or more pages, depending
upon the requirement – how many times entries are expected to be made on that account.
Ledger is usually ruled in any one of the following format.
55
First Format:
Date Particulars Folio Debit (Rs.) Credit (Rs.) Debit or Balance
Credit
Second Format:
Dr. Cr.
Date Particulars Folio Amount Date Particulars Folio Amount
First format is used in those cases where balance is required to be ascertained after every
transaction like banks etc.
Second format is followed in those cases where balance is required to be ascertained only
periodically, say, after a month or a year. This format will be used for making ledgers
All the entries made in the Cash Book will be allotted ledgers. Taking illustration 1 as an
example, separate ledgers for Muana, Government, Dina & Sons, Advertisements, Salaries,
Rent and Furniture will have to be prepared. Please note that there is no duplicity of ledgers.
Rent, being a recurring item i.e. an expenditure which will have to be paid every month, will
56
show number of times within an accounting period. Even so, only one ledger is to be created
for the account „Rent‟.
The transactions are entered in the ledger accounts in order of dates. Every entry must be
dated and records of the relevant amount will be entered in the amount column. In the Folio
column, pages from which the account is entered will be written.
As most of the cashiers and accountants in governmental organizations are without commerce
or accountancy background, the conventional method of journalizing is deliberately omitted
for the sake of simplicity. Enter all those accounts in the ‘Payment’ side of the Cash Book
to their respective ledgers on the left hand side or ‘Dr’ side as Cash or Bank A/c.
Conversely, all those accounts in the ‘Receipt’ side of the Cash Book on the right hand
side or ‘Cr’ side of the respective ledgers as Cash or Bank A/c. Remember to maintain
this as a rule.
For example:
Muana A/c is seen as Receipt in the Cash Book and the entry in Muana ledger will be on the
right hand side or Cr. Side. The two sides are balanced at the end of a given period (say,
accounting period etc.) and the balancing figure is carried down to the subsequent period.
Muana A/c
Dr. Cr.
Nov.2 By Cash A/c 1,000
Nov.30 To Balance c/d 1,000
1,000 1,000
Dec. 1 By Balance b/d 1,000
Similarly, Government A/c is seen as Receipt in the Cash Book and the entry in Government
ledger will be on the right hand side or Cr. side. Note that the receipt is by cheque and so will
be accounted as „Bank A/c‟ in the Government A/c ledger. The two sides are balanced at the
57
end of a given period (say, accounting period etc.) and the balancing figure is carried down to
the subsequent period.
Government A/c
Dr. Cr.
Nov. 30 By Bank A/c 580
Nov. 30 To Balance c/d 580
580 580
Dec. 1 By Balance b/d 580
For those items in Disbursement side, the accounts will be shown in the left side of the
ledger.
For example, Dina & Sons A/c is shown as expenditure in Cash Book. This will be entered in
the concern ledger in the Dr side or left hand side. Note that the transaction is made with
cheque and so the entry will be made as „Bank A/c‟. The two sides are balanced at the end of
a given period (say, accounting period etc.) and the balancing figure is carried down to the
subsequent period.
Dina & Sons A/co
Dr. Cr.
Nov.4 To Bank A/c 320
Nov. 30 By Balance c/d 320
320 320
Dec.1 To Balance b/d 320
Similarly, for other items in the disbursement side of the Cash Book, ledgers are to be
prepared as follows:
58
Advertisment A/c is shown as expenditure in Cash Book. This will be entered in the concern
ledger in the Dr side or left hand side. Note that the transaction is made in cash and so the
entry will be made as „Cash A/c‟. The two sides are balanced at the end of a given period
(say, accounting period etc.) and the balancing figure is carried down to the subsequent
period.
Advertisements A/c
Dr. Cr.
Nov.11 To Cash A/c 45
45 45
Salaries A/c is shown as expenditure in Cash Book. This will be entered in the concern ledger
in the Dr side or left hand side. Note that the transaction is made with cheque and so the entry
will be made as „Bank A/c‟. The two sides are balanced at the end of a given period (say,
accounting period etc.) and the balancing figure is carried down to the subsequent period.
Salaries A/c
Dr. Cr.
Nov.19 To Bank A/c 1,250
Nov. 30 By Balance c/d 1,250
1,250 1,250
Dec.1 To Balance b/d 1,250
Rent A/c is shown as expenditure in Cash Book. This will be entered in the concern ledger in
the Dr side or left hand side. Note that the transaction is made in cash and so the entry will be
made as „Cash A/c‟. The two sides are balanced at the end of a given period (say, accounting
period etc.) and the balancing figure is carried down to the subsequent period.
59
Rent A/c
Dr. Cr.
Nov.4 To Cash A/c 400
400 400
Furniture A/c is shown as expenditure in Cash Book. This will be entered in the concern
ledger in the Dr side or left hand side. Note that the transaction is made with cheque and so
the entry will be made as „Bank A/c‟. The two sides are balanced at the end of a given period
(say, accounting period etc.) and the balancing figure is carried down to the subsequent
period.
Furniture A/c
Dr. Cr.
Nov.30 To Bank A/c 375
375 375
60
Illustration 2:
DRDA CASH BOOK
Page 1
Receipt Disbursement
Date Particulars LF Bank Amount Date Particulars LF Bank Amount
1/1 To Balance b/d 10000 100000 2/1 By Rent 400
5/1 “ Rent 100 2/1 “ Salaries 200
13/1 “ Government 1000 5/1 “ BDO 100
12/1 “ BDO 100
28/1 “ Water Bill 100
31/1 “ Stationery 100
31/1 “ Balance c/d 10600 99500
11000 100100 11000 100100
Page 2
1/2 To Balance b/d 10600 99500 1/2 By Rent 400
4/2 “ Rent 100 5/2 “ Salaries 200
21/2 “ Government 1000 5/2 “ BDO 100
26/2 “ Water Bill 100
28/2 “ Stationery 200
30/2 “ Balance c/d 11100 99100
11600 99600 11600 99600
Page 3
1/3 To Balance b/d 11100 99100
61
Solution:
Rent A/c
Dr. Cr.
2/1 To Cash 400 5/1 By Cash 100
1/2 “ Cash 400 4/2 “ Cash 100
“ Balance c/d 600
800 800
* There is a credit balance of Rs. 600/-

Salaries A/c
Dr. Cr.
2/1 To Bank 200
5/2 “ Bank 200
By Balance c/d 400
400 400
62
BDO A/c
Dr. Cr.
5/1 To Bank 100
12/1 “ Bank 100
5/2 “ Bank 100
By Balance c/d 300
300 300
Water Bill A/c

Dr. Cr.
28/1 To Cash 100
26/1 “ Cash 100
By Balance c/d 200
200 200
Government A/c
Dr. Cr.
13/1 By Bank 1000
To balance c/d 2000 21/2 “ Bank 1000
2000 2000
* There is a debit balance of Rs. 2000/-
63
Advantage of ledger maintenance:
As mentioned earlier, it is quite difficult to easily reckon just how much transaction for one
account is made within a year in organizations like DRDAs. As the transactions made even
for a day may be quite voluminous, entries of an account like Rent A/c may be made in
different pages within a year. Thus, ledgers serve as a „box‟ where all transactions for a
particular account (say, rent) are kept in order. Taking illustration 2 as an example, DRDA
Cash Book shows multiple entries for Rent A/c, both in receipt and disbursement side. This
implies that it is cumbersome to give the true picture concerning Rent A/c just from the Cash
Book. If proper ledger is maintained for Rent A/c, true figure concerning the account can be
obtained from the respective ledger at any given point of time.
64
CHAPTER FIVE
RECEIPT AND PAYMENT
After all the ledgers are balanced, the balancing figures are compiled in „Receipt and
Payment A/c”. This A/c is merely compilation of the Cash Book for an accounting year. It
is an abridged edition of Cash Book and therefore, in effect, a summary of Cash Book.
All cash receipts during the whole year are recorded on its left-hand side, while all cash
payments during the whole year are written on its right-hand side, arranged in a classified
form. Cash receipts and cash payments of both capital and revenue nature are recorded here.
Capital expenditure is such expenditure the benefits of which are available to the
organization over a long period. It results in the enhancement of productivity of the
organization. It also includes producing asset comparatively permanent. E.g. Purchase of
vehicle, construction of building etc. Revenue expenditures are those expenses incurred in
maintenance of organization. The full benefit is consumed within the same accounting period.
E.g. Rent, repairing of car etc.
In Receipt & Payment A/c, there is no Bank column and Cash Column, but are integrated into
a single amount column. The opening balance of bank column will appear as „Opening Bank
balance‟ and „Opening Cash balance‟. The balance c/d of Bank column and Cash column in
the Cash Book will be shown as „Cash-in-hand at the end of the year‟ or „Closing Cash
balance‟ and „Cash-at-bank at the end of the year‟ or „Closing Bank balance‟. The ledger
balances will be entered in their respective sides in the Receipt & Payment A/c. All credit
ledger balances will be entered in Payment and all the debit ledger balances will be entered in
Receipt.
The advantages of preparing Receipt & Payment A/c may be seen as below:
1. The receipts and total payments under various heads are available at a glance
2. The amount of cash in hand at the year-end can be ascertained
3. The correctness of Cash Book can be verified through it
4. The total of Debit side of Cash Book will agree with that of Receipts side of Receipts
and Payments Account. On the other hand, the total of Credit side of Cash Book will
agree with that of payments side of Receipts and Payments Account
65
Taking Illustration 2, Receipt and Payment A/c is compiled for the accounting year as
follows:
Receipt & Payment A/c of DRDA for the year………….
Receipt Payment
Particulars Amount Particulars Amount
To Opening Cash balance 10000 By Rent 600
“ Opening Bank balance 100000 “ Salaries 400
“ Government 2000 “ BDO 300
“ Water Bill 200
“ Stationery 300
“ Closing Bank 11100
“ Closing Cash 99100
112000 112000
66
CHAPTER SIX
INCOME AND EXPENDITURE ACCOUNT
Introduction
As mentioned in the previous chapter, Receipt and Payment A/c (or R&P A/c) is basically
Cash Book compiled for an accounting period. Therefore, R&P A/c operates under the
principle of Cash Basis. It records all receipt and payment- not considering what type of
receipt/ payment it is and for which period of time.
Taking for example, if there is an asset, say, motor bike is bought during the year, the amount
will be shown as expenditure. In other words, if a bike is bought, the amount is expended.
But in reality, even though the cash balance will be reduced by the purchase of the bike, the
monetary value is exchanged for the value of asset itself. This is not disclosed by Receipt &
Payment A/c. Again, unpaid debts are not shown in R&P A/c. This is due to the fact that
there is no actual disbursement of cash or bank. Therefore, R&P A/c shows the financial
balance with the organization at the end of the period, not the actual financial situation for the
particular accounting period. The actual financial status of the organization is shown by
Income & Expenditure A/c (or I&E A/c) and Balance Sheet. It should be noted that Receipt
& Payment A/c is not an account within the Double-Entry system. Rather, it is a statement
form.
Income and Expenditure account records revenue expenditure and revenue income whether
paid or not/ received or not and is pertaining only to the current accounting period. The non
cash expenses like depreciation are also recorded in Income and Expenditure Account. The
resultant figure of Income and expenditure account is either excess of income over
expenditure or excess of expenditure over income. It is a substitute of Profit & Loss A/c in
non-trading organizations. Expenses are shown on debit side and incomes on credit side in
Income and Expenditure A/c, the reverse order of Receipt & Payment A/c. The balance of
Income & Expenditure A/c is transferred to Capital Fund (i.e. in the Balance Sheet). I&E A/c
are accompanied by Balance Sheet and falls within Double Entry system.
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Steps for preparing Income & Expenditure A/c
► Ignore opening and closing balances of cash book/ R&P A/c

► Eliminate all capital items
► Ascertain and consider only those incomes and expenditures incurred during the
relevant year
► Make adjustments in respect of bad debts, depreciation etc.
► Ascertain the difference of income and expenditure. If income side is more = surplus
and deficit if expenditure is more. Add to Capital Fund in Balance Sheet if surplus
and deduct, if deficit
Illustration 3
Receipt & Payment A/c of DRDA for the year ending……….
Receipt Rs. Payment Rs.
Government 1,00,000 POL 200

Bank Interest 2,000 Salary 1,000
Stationery 50
Electric Bill 200
Water Bill 150
Training expenses 2,000
Repair and Maintenance 500
New Bike 30,000
Balance c/d 67,900
1,02,000 1,02,000
68
Solution:
Income & Expenditure A/c of DRDA for the year ending………………..
Expenditure Income
POL 200 Bank Interest 2000

Salary 1000 Draft from Govt. 100000
Stationery 50
Electricity 200
Water bill 150
Training expenses 2000
Repairing 500
Surplus (excess of income 97900
over expenditure)
102000 102000
Illustration 4:
Opening balance 1,000 POL 200

Draft from Govt. 1,00,000 Salary 1,000
Bank Interest 2,000 Stationery 50
Electric Bill 200
Water Bill 150
Repairing 500
New Bike 30,000
Balance c/d 68,900
1,03,000 1,03,000
69
After the preparation of Receipt & Payment A/c for the year, the following information was
furnished:
1. A building worth Rs. 1,00,000 already constructed is to be taken into consideration
2. Training expenses Rs. 1,000 still unpaid
3. Provide 5% depreciation on building
Solution:
 Building, as it is an asset, will not show in I&E A/c but the depreciation 5% on the
asset worth will be charged as „Expenditure‟. Depreciation is a provision created for
valuing the true worth of an asset and this depreciation is shown as expenditure even
though it is not an actual monetary expenses. That is why it is not shown in R&P A/c.
 Training expenditure Rs. 1,000 was not shown in R&P A/c because it was still unpaid
but it has to be accounted for in the accounting year as expenditure. Only then the
actual financial situation can be arrived at.

Expenditure Income
POL 200 Bank Interest 2000

Salary 1000 Draft from Govt. 100000
Stationery 50
Electric 200
Water bill 150
Training expenses 2000
Repairing 500
Outstanding Training Bill 1000
Depreciation on building 5000
Surplus (Excess of income 91900
over expenditure)
1,02,000 1,02,000
70
CHAPTER SEVEN
BALANCE SHEET
Introduction:
The previous chapter deals with Income & Expenditure A/c. However, it should be noted that
this I&E A/c is not complete unless accompanied by Balance Sheet. Balance Sheet is
prepared for an accounting period to show the true financial standing of an organization.
Liabilities are shown on the left side and assets are shown on the right side. Liabilities
include Capital, Reserves & Surplus, Current liabilities etc. Assets include Fixed Assets like
buildings, land etc. and Current Assets like cash-in-hand, bank account etc. In the Balance
Sheet prescribed by the Guidelines, Liabilities and Assets are shown one upon the other.
Even then, the principle underlining the preparation is the same.
Steps for preparing Balance Sheet:
 All capital items will find its place in the Balance Sheet
 Opening cash balance will be included in the Balance Sheet under Current Asset
 Adjustments made to the expenses shown in I&E A/c will also appear in Balance
Sheet. Outstanding expenses will appear on liability side and prepaid expenses on the
asset side
71
Illustration 5:

Government 1,00,000 POL 200

Bank Interest 2,000 Salary 1,000
Stationery 50
Electric Bill 200
Water Bill 150
Repair and Maintenance 500
New Bike 30,000
Closing Balance 67,900
1,02,000 1,02,000
Solution:
Expenditure Rs. Income Rs.
POL 200 Bank Interest 2,000

Salary 1,000 Government 1,00,000
Stationery 50
Electricity 200
Water bill 150
Repairing 500
Surplus (excess of income 97,900

over expenditure)
1,02,000 1,02,000
72
Balance Sheet of DRDA as on ………………
Liabilities Amount Assets Amount
Capital: Motor Bike 30,000
Excess of Income over 97,900 Cash-in-hand (Balancing Figure) 67,900

Expenditure
97,900 97,900
Illustration 5:
Opening balance 1,000 POL 200

Draft from Govt. 1,00,000 Salary 1,000
Bank Interest 2,000 Stationery 50
Electric Bill 200
Water Bill 150
Repairing 500
New Bike 30,000
Closing Balance 68,900
1,03,000 1,03,000
73
Expenditure Rs. Income Rs.
POL 200 Bank Interest 2,000

Salary 1,000 Government 1,00,000
Stationery 50
Electric 200
Water bill 150
Repairing 500
Outstanding Training Bill 1,000
Depreciation on building 5,000
Surplus (Excess of income 91,900
over expenditure)
1,02,000 1,02,000
Balance Sheet of DRDA as on………………..
Liabilities Amount Assets Amount
Capital fund 1,00,000 Building 1,00,000
(building construction fund) (-) Depreciation 5,000 95,000
Excess of Income over exp. 91,900 Motor Bike 30,000
Outstanding training expenses 1,000 Cash:
At beginning: 1,000
Current year: 66,900 67,900
1,92,900 1,92,900
74
Note:
 Cash Rs. 67,900 is the balancing figure of Liabilities and Assets.
 Opening cash balance according to R&P A/c is Rs. 1000. Therefore, Cash acquired
during the year can be calculated out by subtracting Rs. 67,900 from Rs. 1000, which
amount to Rs. 66,900.
 Compare the closing balance of R&P A/c to the Cash amount in Balance Sheet. The
R&P A/c shows Rs. 68,900 while Balance Sheet Cash shows Rs. 67,900. The R&P
A/c closing balance is the amount at the end of the year. It can be seen that there is
still an unpaid expenditure of Rs. 1,000 and this is not shown in R&P A/c. The
Balance Sheet gives the true financial picture at the end of the year by showing Rs.
67,900, which is R&P A/c closing balance Rs. 68,900 less unpaid training expense
Rs. 1,000.
75
CHAPTER EIGHT
PRESCRIBED FORMAT
The prescribed format of the three statements of accounts mentioned by the Ministry of Rural
Development guidelines is displayed below:
76
77
78
CHAPTER NINE
FINANCIAL MANAGEMENT PRACTICE
The financial management within the Rural Development establishments under the
Government of Mizoram has its own system. The pattern of fund flow can be seen as below:
Ministry of Rural Development State Government

(Central Share) (State Share)
District Rural Development Agencies

(DRDAs)
Block Development Offices

(BDOs)
Village Councils
(VCs)
Villagers
The Centrally Sponsored Schemes funding goes directly to the District Agencies and this
funding will be matched by the State in the prescribed percentage. The funding is usually
transferred telegraphically to the main bank account of the DRDA. Simultaneously, sanction
orders are issued by the Central Government. This amount is entered in the Main Cash Book
of the DRDA when the deposit is accounted for. The funding will come for a specific scheme
e.g. IWDP (Integrated Wasteland Development Programme). It should be noted that these
Central Sponsored Schemes will be having several components like works component,
training component and administrative cost component. As soon as the fund is received, the
amount is disbursed from the Main Cash Book to the scheme-wise Subsidiary Cash Book.
For example, if Rs. 1 lakh is received in the Main Cash Book for IWDP, this 1 lakh will be
79
disbursed from the Main Cash Book to the IWDP Subsidiary Cash Book. From these
subsidiary cash books, the DRDAs will disburse the required amount to the different Block
offices within their districts. Again, when the Block Office receive the fund in their main
account, they will transfer it to their scheme-wise subsidiary cash books. This is done so as to
keep „zero-balance‟ in their main Cash Book. The Block Offices will disburse the scheme
funding to the Village Councils. As required by the Guidelines, the District Agencies are to
maintain ledgers to Block level and the Block Offices are to maintain ledgers to Village level.
80
USING TALLY FOR COMPUTERISED
ACCOUNTING
 Introduction to Tally
 Creating Organization Profile
 Creating Ledgers in Tally
 Creating Groups for Ledgers
 Accounting Receipts
 Accounting Payment
 Contra Entry
 Altering the Organization Profile
 Alteration of Ledgers
 Alteration of Transactions
 Viewing Income and Expenditure

Account
 Viewing Balance Sheet
 Easy Reckoner
81
CHAPTER ONE
INTRODUCTION TO TALLY
There are many accounting packages are available in the market, Tally remains the
undisputed king of all financial accounting packages available in India. Tally is capable of
handling any kind of transaction you would need, whatever your business. In order to use
tally, you neither need to neither learn new accounting methods nor should change your
existing style of handling accounts. The information can be fed as well retrieved at random
and all human errors can be corrected. A transaction in accounting terminology means
transfer of money or money‟s worth from one party to another, for example sale of goods,
purchase of furniture etc. are examples of transactions. Fundamentally there are two systems
of transactions: Pre transaction and post transaction. Let us explore it in detail, assume that
you have to make payment to a party, in pre transaction, this is done by first creating a
voucher, which is signed by payee and then the transaction is completed by actually making
the pay creation of internal entries in case of completed transactions. The post transaction
system follows the traditional practice of entering a voucher or cash bill into a cash book after
the payment has been made. Tally is a post transaction system. It follows the traditional
methods of accounting, that is, the payment is first made on the basis of existing accounting
methods (i.e., against a voucher or a cash bill) and that information is fed into the Tally. The
simple fact that your existing system of accounting remains untouched by Tally is a big
reason behind the success of this package. The area of the Tally is very wide, you could be
the owner, financial controller, accountant, manager or an auditor. All that is required to learn
Tally is fundamental knowledge of accounts and familiarity with basic accounting
terminology. This means that you should understand certain basic terms like an account, a
debtor, a creditor, assets, liabilities, capital etc. Even if you are not well versed with the
accounting, you can still use Tally effectively at the same time become known to accounting
methods. Tally have many versions like 3.0, 4, 4.5, 5.0 5.4 etc. Tally release 5.0 and 5.4 are
window based software in which you feel the window look like programs, than the text based
screens. We shall be dealing with Tally 9 in this step-by-step pictorial guide based on the
prescribed format.
82
CHAPTER ONE
CREATING THE ORGANIZATION PROFILE
1. Tally software is worked by double-clicking on the „Tally.exe‟ icon inside the „Tally‟
folder.
2. The following interface will open. This window will prompt you to „Create
Company‟. We assume that „Company‟ in Tally term as any organization we will be
creating profile for.
83
CHAPTER TWO
CREATING LEDGERS IN TALLY
1. The following window is where the details of the organization is recorded
2. After entering details of the organization in the required parameters, press <enter> to
accept and move on to the next parameter untill all fields are completed and the
software prompt you to accept or not
84
3. After pressing <Enter> or <Tab> or <Y> key, the entered details will be saved into
the system and the organization profile will be created and the next window will show
the „Gateway of Tally‟. This area is the workplace for all entries
It is the area in which you actually work. You can activate this area either by clicking
anywhere in this area or by pressing <Ctrl> + <M> key combination.
Direct Command Area:
Although Tally supports mouse commands; you can execute all commands in plain
English from a keyboard by typing them in this area. You can activate this area either
by clicking anywhere in this area or by pressing <Ctrl> + <N> key combination.
The Buttons:
This area contains buttons which perform various useful functions. For example the
second button in this area has a caption “F4:Backup” this means that in order to take
backup of a company on floppy disk you will have to either click on this button or
press the <F4> key. The third button has caption “F4:Restore”. This means that in
order to restore a company whose backup had been already taken on floppy you will
have to either click on this button or press <Alt+F4> key combination.
Company Information Menu:
The right half of the Gateway of Tally area displays the company info. Menu. This
menu has following three options:·Select Company, Create Company and Quit
85
4. Before entering any transaction, the first step is to create ledgers. We have to make
ledgers for all those items in the Cash Books. By moving the cursor of the keyboard,
you can highlight „Accounts info‟. Press <Enter> or <A> to start creating ledgers.
This will take us into „Gateway of Tally‟ to this window.
5. When we enter „Ledgers‟, the next window will open for you to start creating ledgers.
You can see the „Create‟ option in this window. We shall be creating Single Ledger
for our example as organizations like DRDAs do not maintain Multiple Ledgers.
86
6. When „Create‟ is selected, the following screen will appear. Enter required fields to
create a functional ledger. In the picture, „DRDA Bank‟ ledger is being created
7. When the name of the ledger is entered, press <Enter> or <Tab> and the field „Under‟
will be highlighted and a box „List of Groups‟ will drop down in the right corner of
the window. Move your cursor to highlight the appropriate group for your ledger.
Here, „Bank Accounts‟ is selected for DRDA Bank.
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Note that „Opening Balance as on 1.04.2010‟ Rs. 8,14,726 is entered
8. Similarly, the following ledgers are created and their appropriate groups are assigned
88
Creating ledger for „State Government‟
Creating ledger for „Publicity and Advertising‟
89
Creating ledger for „Interest from Bank‟
Creating ledger for „Outstanding Expenses‟
90
Creating ledger for „Vehicle‟
Creating ledger for „Furniture & Fixtures‟
91
Creating ledger for „Office Equipment‟
Creating ledger for „Computer & Peripherals‟
92
Creating ledger for „Others (Furnishing)‟
93
CHAPTER THREE
CREATING GROUPS FOR LEDGERS
1. Some ledgers can be grouped under a common heading for more convenience. In such
cases, the procedure starts from „Gateway of Tally‟ and entering „Accounts info‟ as in
creation of ledgers. Here, we shall be entering „Groups‟
2. When „Groups‟ is entered, the following window will prompt for creating group for
ledgers
94
3. On entering „Create‟, the following window will open for creating group.
4. A group named „Expenses on Administration‟ is created under Indirect Expense.
95
Similarly, „Any Other Item‟ and „Suspense‟ groups are created by following the same
procedure
96
5. Going back to the creation of ledgers, Salary and Allowances ledger is created. In the
„List of Groups‟, the newly created group „Expenses on Administration‟ can be
selected
Ledger for „Travelling Expenses‟ under the created group „Expenses on

Administration‟
97
Ledger for „Printing and Stationery‟ under the created group „Expenses on
Administration‟
Ledger for „Electricity‟ under the created group „Expenses on Administration‟
98
Ledger for „Telephone‟ under the created group „Expenses on Administration‟
Ledger for „Leave Salary and Pension‟ under the created group „Expenses on
Administration‟
99
Ledger for „Motor Vehicle Maintenance and Repairs‟ under the created group
„Expenses on Administration‟
Ledger for „Seminar and Meetings‟ under the created group „Expenses on
Administration‟
100
Ledger for „POL‟ under the created group „Expenses on Administration‟
Number of ledgers are created under the group „Any Other Items‟
101
Ledger for „Administrative Cost of State Headquarters‟ under the created group „Any
Other Items‟
Ledger for „Medical Reimbursement‟ under the created group „Any Other Items‟
102
Ledger for „Newspaper and Magazines‟ under the created group „Any Other Items‟
Similarly, several ledgers are created under „Suspense‟ following the similar
procedures. Ledger for „GPF/EPF/CPF‟ under the created group „Suspense‟
103
Ledger for „Income Tax Paid‟ under the created group „Suspense‟
Ledger for „HBA/MCA or Other Advances‟ under the created group „Suspense‟
104
CHAPTER FOUR
ACCOUNTING RECEIPTS
1. To receive any cash or bank, start from „Gateway of Tally‟ and enter „Accounting
Vouchers‟
2. At the right-hand side of the window, column of buttons are lined for various
functions viz. receipt, payment, contra, journal and so on. Click the „Receipt‟ button
or <F6> on your keyboard and the following window will appear
105
3. When „Account‟ field is clicked, „List of Ledger Accounts‟ dropped down on the right
hand corner of the window and display two accounts Cash (which is automatically
created by the software) and DRDA Bank (which you have created before). Select
whether you are receiving in cash or in bank.
4. After selecting DRDA Bank for „Account‟ field, the „Particulars‟ field is highlighted
for entering which ledger is receiving funds. Note that only the ledgers created will be
shown in the „List of Ledger Accounts‟
106
5. The amount so received is entered in the field
6. If so desired, narrations regarding the transaction can be noted at the bottom left field
107
7. Similarly, receipts from „State Government‟ and „Interest from Bank‟ are entered
108
CHAPTER FIVE
ACCOUNTING PAYMENT
1. To make any payment entry, start from „Gateway of Tally‟ and enter „Accounting
Vouchers‟
functions viz. receipt, payment, contra, journal and so on. Click the „Payment‟ button
or <F5> on your keyboard and the following „Payment‟ window will appear
109
3. In the picture shown below, payment is being made for „Salary and Allowances‟ with
„DRDA Bank‟. Note that as in the case of receipt, the fields for „Account:‟ and
„Particulars‟ can be made with only the ledger accounts you have made before.
Similarly, payments for other accounts are made as below
110
Payment for „Printing and Stationery‟ with „DRDA Bank‟
Payment for „Telephone‟ with „DRDA Bank‟
111
Payment for „Leave Salary and Pension‟ with „DRDA Bank‟
Payment for „Motor Vehicle Maintenance and Repairs‟ with „DRDA Bank‟
112
Payment for „Seminars and Meetings‟ with „DRDA Bank‟
Payment for „POL‟ with „DRDA Bank‟
113
Payment for „Repairs and Maintenance of Machinery‟ with „DRDA Bank‟
Payment for „Administrative Cost of State Headquarters‟ with „DRDA Bank‟
114
Payment for „Medical Reimbursement‟ with „DRDA Bank‟
Payment for „Newspaper and Magazines‟ with „DRDA Bank‟
115
Payment for „GPF/EPF/CPF‟ with „DRDA Bank‟
Payment for „Furniture & Fixtures‟ with „DRDA Bank‟
116
Payment for „Office Equipment‟ with „DRDA Bank‟
Payment for „Motor Vehicle Maintenance and Repairs‟ with „DRDA Bank‟
117
CHAPTER SIX
CONTRA ENTRY
1. To make contra entry, start from „Gateway of Tally‟ and enter „Accounting Vouchers‟
functions viz. receipt, payment, contra, journal and so on. Click the „Contra‟ button or
<F4> on your keyboard and the following „Contra‟ window will appear. Suppose you
are withdrawing „Cash‟ from the „DRDA Bank‟ account, enter „Cash‟ in „Account:‟
field
118
3. Then, enter „DRDA Bank‟ in the „Particular‟ field
4. Enter the amount withdrawn from the Bank
119
CHAPTER SEVEN
ALTERING THE ORGANIZATION PROFILE
1. To make change in the organization profile, go to „Gateway of Tally‟ window. On the

menu bar on the right side of the window, you will see „Comp Info‟.
2. On clicking the button, the following window will appear. Enter „Select Company‟
120
3. On entering „Select Company‟, the following window displaying „List of Company‟
will appear. Select our organization „DRDA‟. Note that if you create more than one
organization profile, the list will display it here
4. You can change any details about the organization‟s profile in this window
121
CHAPTER EIGHT
ALTERATION OF LEDGERS
1. To alter any details of a ledger, go to <Gateway of Tally>, enter <Accounts Info> and
<Ledgers>. Here you will find „Alter‟ option.
2. Upon entering „Alter‟, the following window will be displayed showing „List of
Ledgers‟. Select „Account Recievables and Advances Recoverables‟
122
3. On selecting the ledger, the following ledger alteration window will appear. Here, any
changes required can be made
123
CHAPTER NINE
ALTERATION OF TRANSACTIONS
1. To make any changes in transactions already entered, go to „Gateway of Tally‟,

<Enter> „Profit & Loss A/c‟, <Enter> „Any Other Items‟. Select „Administrative Cost
of State Headquarters‟ and press <Enter>
2. On entering the „Administrative Cost of State Headquarters‟, voucher for the ledger
will appear. Select „DRDA Bank‟ and press <Enter>
124
3. On entering „DRDA Bank‟, „Accounting Voucher Alteration‟ window will appear and
any required changes can be made here and saved to the system
125
CHAPTER TEN
VIEWING INCOME & EXPENDITURE ACCOUNT
1. In order to view Income & Expenditure A/c in Tally, we have to enter „Profit & Loss
A/c‟. It should be understood that Profit and Loss A/c is equivalent to Income &
Expenditure A/c in case of Non-Profit Organizations like Government etc.
2. On entering „Profit & Loss A/c‟, the following window will display. To gte more
details about, say, „Indirect Expense‟, highlight it and press <Enter>
126
3. Upon entering „Indirect Expenses‟, the following window will appear. To get more
details about, say, „Any other Items‟, highlight it and press <Enter>
127
CHAPTER ELEVEN
VIEWING BALANCE SHEET
1. To view Balance Sheet, go to „Gateway of Tally‟. „Balance Sheet‟ will be under

Reports as shown in the picture.
2. On entering „Balance Sheet‟, the following window will display the balance sheet till
date
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CHAPTER TWELVE
EASY RECKONER
1. In case of payment, Account: Cash/Bank A/c

Particular: Expenses A/c
2. In case of receipt, Account: Recipient A/c

Particular: Giver A/c
3. In case of contra, Account: Recipient A/c
Particular: Giver A/c
4. Alteration/ Deletion of company
Select Company> Company Info> Alter> Alt+ Del
5. Alteration of transaction
Gateway of tally> Balance Sheet> Respective voucher, then make alterations
6. Ledger alteration
Gateway of tally> Ledger> Alter
7. Any reports can be printed. <ENTER> any reports like Profit & Loss A/c or Balance Sheet and
you can find ‘Print’ command button. Similarly, you can export, email or upload these
reports.
8. Basic Commands:
a. To accept any entry <ENTER> or <Tab>
b. To move back one field <Backspace>
c. To move back one window <Esc>
d. In every command option, one letter in the word will be red in colour. Press
the corresponding key (letter) and it will function as a hot-key or short-cut key
to enter the command
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9. Common information on Creation of Voucher:
a. Type of Voucher: All screens at the top left of voucher box display the Type
of Voucher‟ you are entering like, Purchase, Payment etc. You can change
this type by pressing the relevant key.
b. Voucher Number: The entire voucher displays the number of the voucher.
You can set these numbers manually or let the Tally generate it
automatically.
c. Date of Voucher: The top right of the voucher box displays the date of
voucher and the day of the week; this date indicates the current date on
which you are entering the voucher. The same date appears as the current
date at the Gateway of Tally. You can change date by pressing <F2> Key.
d. Particular: In accounting vouchers this column contains the information
about the ledgers you debit or credit. When To or Cr is displayed, specify the
ledger to credit. When By or Dr is displayed, specify the ledger to debit.
e. Debit/Credit: This column takes value of transactions. Therefore, specify the
amount of the transaction here. If you debit a ledger, the amount goes into
the debit column and if you credit a ledger, the amount goes into the credit
column. At the bottom of these columns, the totals of the debit and credit
amount appears. Note: The voucher entry is completed only when the total in
the two columns matches.
f. Narration: Under each debit or credit entry, there is a provision for narration.
In this column, you can mention the details of the entry. At the end of the
voucher, there is a common narration for the whole voucher. The option for
writing narration, for each entry will be present only if you had set the option
‘Use narration for each entry‟ in the accounting vouchers section of the
voucher configuration menu „Yes‟.
130
ABOUT THE AUTHOR
Laldinliana is an Assistant Professor in Department of Commerce,

Mizoram University (Central University) since July, 2010. He was
previously the Assistant Director/ Core Faculty (Commerce) in State
Institute of Rural Development, an autonomous apex training institution
under Government of Mizoram. An alumnus of Loyola College, he
specialised in Entrepreneurial Development in M.Com with distinction
in Advanced Business Statistics. He was conferred Certified Finance
Manager (CFM) by National Institute of Management, Mumbai
recognised by Government of Mumbai and internationally accredited by
UKAS. He completed his Post Graduate Diploma in Computer
Applications (PGDCA) and Post Graduate Diploma in Marketing
Management (PGDMM) from NCT and CBRD, Chennai. His
affiliations include All India Management Association, All India
Commerce Association and Indian Accounting Association Research
Foundation (IAARF). He also authored “A Facilitator‟s Primer on
Entrepreneurship and Group Dynamism”, a publication of SIRD
Mizoram in 2009.
131

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SIRD

I want to go back to the time when

ACCOUNTING GUIDELINES OF MINISTRY OF RURAL DEVELOPMENT (2001)

1. Double Entry System

USING TALLY FOR COMPUTERISED ACCOUNTING

Based on the recommendations of an inter-ministerial working group a revised accounting

(iv) There should be test audit by the C&AG of India.

(viii) A standard format for furnishing Utilisation Certificate was prescribed.

(12) DRDAs/Blocks should maintain a register of the Permanent and Semi

DRDA.s/ZP/DLC/Block & Panchayats should maintain a consolidated Receipt and Payment

Scheme Account should be maintained only in .Nationalised/Cooperative/ Regional Rural

Funds transferred to Block Development Officers/Implementing Agencies shall be reflected

Flow of funds from DRDAs/ZPs/Blocks/Gram Panchayats and Implementing Agencies

Each DRDA/ZP/DLC on NSAP should maintain a Consolidated Receipt Register indicating

Unutilised funds under any head/scheme should be reflected as ‘Opening Balance’ in

All accounts received in cash or cheque/Draft will be acknowledged by printed receipts

The Central Schemes being implemented through District Level Implementing

(a) Receipt and Payment Account

Monthly review of Advances paid to various executing agencies/Implementing Agencies and

Maintenance of following Registers

Preparation of Annual Financial Statements for Audit as in Chapter XVII

Maintenance of the accounting records as given in Chapter XIX.

Scrutiny of subsidy claims made by Banks dealing with SGSY.

Receipts and Payments Account

Income & Expenditure Account

For this purpose the following steps may be necessary

i) The Balance Sheet must be prepared for every financial year

The Annual Financial Statements should be accompanied by the following Schedules:

DRDA.s/ZP/DLC shall prepare following monthly statements for each scheme.

1. Preparation of Bank Reconciliation Statement.

2. Monthly / Fortnightly review of Bank Pass Book.

3. Monthly Closing of Cash Book having Summary of Statement of Transaction.

6. Monthly closing of Receipt and Payment Register.

8. Monthly Expenditure Statement.

The following procedure should be observed in regard to assets acquired wholly or

 Double Entry System

 Receipt and Payment

 Income and Expenditure Account

 Financial Management Practice

The advantages of double entry system may be seen as below:

1. It enables to keep a complete record of transactions

Basic Terminologies in Book-Keeping

 Depreciation: Decrease in the value of assets from usage or super-session.

Reasons for providing depreciation:

Calculation of depreciation of assets:

Depreciation expense is calculated utilizing either a straight line depreciation method or an

Straight Line = Cost / Life

1 1,467.89 X 33.34 % 489.40

2 1,467.89 X 26.67 % 391.49

4 1,467.89 X 13.33 % 195.67

5 1,467.89 X 6.67 % 97.91

Types of cash book

1. Single column cash book (cash column)

The following transactions are to be entered in DRDA Cash Book

Cash basis and Accrual Basis:

* There is a credit balance of Rs. 600/-

* There is a credit balance of Rs. 400/-

* There is a credit balance of Rs. 300/-

Water Bill A/c

* There is a credit balance of Rs. 200/-

* There is a debit balance of Rs. 2000/-

► Ignore opening and closing balances of cash book/ R&P A/c