Presentation of M. K. Chattopadhyay

1. Annexure X Controller of Finance PBSSM Presentation of M. K. Chattopadhyay on preparation of Annual Accounts under new concepts on 16/07/2013

2. Suggestions to prepare the Final Accounts by the SIS a registered society and not the owner of the Capital Assets created by the SMCs from the grants given by GoI and State Government through the SIS

3. A question was raised by Mr. U. K. Verma, Consultant TSG, EdCILthat as per standard accounting principle for preparation of Final Accounts of a registered society the Assets created by investing the grants without the ownership should not be shown in the Balance sheet and the grant received during a particular year should be considered as income of the society to the extent grants have been utilised during the year.

4. I do agree with the views of Mr. U.K. Verma, but the FMP Manual prescribed the treatment of capital assets in different way and the capital assets created by investing the grant received from GoI and State Government without ownership has been shown as fixed assets in the Balance Sheet

5. Though as per FMP manual provisions the Fixed assets created without ownership is shown in Balance Sheet but there is no system to provide depreciation on fixed assets which is against the principle of normal mercantile system of accounting.

6. To overcome the above mentioned problems I suggest the following accounting systems should be followed considering the SIS a registered society and receiving grants from Govt. and implementing the Govt. flagship programme under different activities given under a certain approved outlay.

7. Govt. Grants are received by SIS under two categories : • Under Capital Heads for creation of fixed assets, such as School Building, ACR, Toilets, Boundary, Drinking Water facilities, TLE etc. • Under General Head for payment of teachers salary, Free Text Books, Uniform, School Grant, Office Exp.(including salary of Officers and Staff ,Purchase of office equipment, Stationery etc.)Training etc.

8. Accounting Entries Required are as follows: • For recording the Grants received— Bank Account Dr 1000 To Capital Grants (GoI) 300 To Capital Grants (State) 200 To General Grants (GoI) 200 To General Grants (State) 150 To 13th F C Grants 150 (As per accounting principle all grants received are treated as liabilities and subjected to submission of U C)

9. When SIS releases fund to user agencies for certain activities following entries are required: Advances against Capital Activities Account Dr 500 Advances against General Activities Account Dr 300 To Bank 800

10. After collection of UCs following entry is required : Capital Assets Expenses Account Dr 400 General Activities Expenses Account Dr 290 To Advances against Capital Activities Account 400 To Advances against General Activities Account 290 ( limited to the amount for which Ucs have been received)

11. For recording the expenses under project management cost for acquiring fixed assets for the SIS : Office Equipment Account Dr 50 To Bank 50 (this amount will not be transferred to Income & Expenditure Account but to be shown in B/S in Assets side)

12. For recording other expenses under project management cost : Project Mgmt. Cost A/c Dr 50 To Bank 50

13. For Transferring the expenses on account of capital assets, general activities, and project management expenses to Income and Expenditure A/c other than the expenses to be utilised against 13th F C grants : Income & Expenditure A/c Dr 590 To Capital Assets Expenses Account 400 To General Activities Expenses Account 140 To Project Mgmt. Exp. A/c 50

14. For recording the interest income : Bank A/c Dr. 50 To Interest Received 50 • For transferring the interest income to Income & Expenditure A/c : Interest Received A/c Dr 50 To Income & Expenditure A/c 50

15. For booking the expenses under 13th F C grants : 13th F C Grants A/c Dr 150 To General Activities A/c(say teachers salary) 150

16. For transferring the amount of grants received except 13th F C grants less interest income to the extent it is required to match the expenses booked against particular activities on collection of U Cs : Capital Grants (GoI) Dr 250 Capital Grants (State) Dr 150 General Grants (GoI) Dr 100 General Grants (State) Dr 40 To Income & Expenditure A/c 540

17. For the fixed assets acquired such as office equipment for the SIS , the ownership of which vests upon the SIS, equivalent amount be transferred from General Grants to General Reserve Fund Account by passing the following entry : General Grants (State) Dr 50 To General Reserve Fund A/c 50

18. While preparing consolidated Annual Financial Statement the expenses on account of fixed assets expenses as the owner and advances given during the year but remain unutilized at year end for both Capital and Non Capital Activities should be included to match the utilization of fund received.

19. Income & Expenditure Account

20. BALANCE SHEET

21. As the Income & Expenditure account is prepared on the principle that so much of the grant will be treated as income which is required to match the amount of the expenses less other income for which UCs have been received and the balance of grants will remain as liabilities subject to utilisation in next year. So this amount will be shown in B/S under Liabilities side.

22. A separate schedule be prepared for Capital Assets created without the ownership which is not a part of B/S but will exhibit the Grants invested for creation of assets for Schools and this schedule should be updated every year by showing the investment upto last year as opening balance of investment, add investment during the year , Total cumulative investment at year end. This will be only for the investment against which UCs have been collected.

23. Advances remain unadjusted for both Capital Assets and Non-capital Assets will be shown in the balance sheet and a separate schedule will be prepared.

24. In subsequent year if UCs collected against outstanding advances of previous years following entries are required: For Advance of Capital Assets— Capital Grants (GoI & State) Dr 100 To Advance for Capital Asset Activities 100 For Advance of General Activities— General Grants (GoI & State) Dr 10 To Advance for General Activities 10 ( These adjustment will not be reflected in Income & Expenditure A/c of the current year)

25. If any amount is received back from the user agency against fund given earlier years and which was booked as expenditure, the following treatment shall be given in the A/Cs 1) Bank A/C Dr. 500 To Refund against previous year expenditure A/C 500 2) Refund against previous year expenditure A/C Dr. 500 To General Reserve/Capital Reserve 500

26. THANKS