ICAI TO HELP INDIAN RAILWAYS UPGRADE ACCOUNTING PRACTICES

 The Institute of Chartered Accountants (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,” said ICAI President Ved Jain.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 provides more scope for frauds and siphoning of money.Companies, 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.“It (cash-based) is somewhat deficient in terms of transparency and there is a need to move on to an accrual-based system of accounting in the government,” the prime minister had said.One of the largest rail networks in the world, Indian Railways employ around 1.4 million people.As per the Railway Budget 2008-09, the net revenue expected is Rs 18,416 crore and return on capital for 2007-08 was at an all-time high of 21 per cent. It proposes to invest Rs 37,500 crore in the sector, which is 21 per cent higher than the previous year.The ICAI is already working with the Department of Posts on three circles to modernise its accounting system and is in talks with several other departments to help them convert their accounts to accrual-based practice, he said.For the purpose, the institute has been working with the Comptroller and Auditor General of India (CAG) and the Controller General of Accounts (CGA) as it is an important step towards making government accounts more transparent, Jain said.