Apex chartered accountant institute ICAI will help the 155-year-old Indian Railways upgrade its accounting practices. “We will help the Railways upgrade its accounting system and make it look like a corporate account, fully based on accrual accounting system,” Institute of Chartered Accountants (ICAI) President Ved Jain told PTI.
As the government is in the process of moving towards the accrual-based accounting system, the institute will be providing technical assistance to state-owned entities to help them graduate to advanced accounting system.
The 12th Finance Commission has recommended adopting the accrual-based accounting system. Accrual-based system requires a revenue or expenditure to be recognised as and when they take place, while in the cash-based system only actual payment or receipt is recorded.
The government, for historical reasons, follows the cash-based accounting system. This system which provides more scope for frauds and siphoning of money. Corporates, on other hand, follow accrual-based system.
The government has decided to adopt the accrual-based system as it is considered better than the other in terms of transparency and user-friendliness.
This will help the management in taking informed decision on allocation of resources and also help curb various malpractices in the garb of accounting.
Prime Minister Manmohan Singh had said that public sector accounting across the world has witnessed a significant change and accordingly India needed to adopt the accrual basis of accounting too.