The Constitution of India provides for the manner in which the accounts of the Government have to be kept. Article of the Constitution provides for creation of a Consolidated Fund of India, Contingency Fund and Public Account.
All revenues received, loans raised and all moneys received by the Government in repayment of loans are credited to the Consolidated Fund of India and all expenditures of the Government are incurred from this fund. Money can be spent through this fund only if appropriated by the Parliament. The consolidated Fund has further been divided into Revenue and Capital divisions.
All other moneys received by or on behalf of Government are credited to the Public Account.
Contingency Fund enables the Government to meet unforeseen expenditure, which cannot wait approval of the Parliament. For meeting such exigencies, advances are made to the executive from the Contingency Fund which are subsequently reported to the Parliament for recoupment from the Consolidated Fund of India.
One of the most distinctive features of the Government accounts in India is the minute detail with which the financial transactions are recorded in the account books. All transactions are classified on a six tier functional classification with Major Heads representing a broad function of the Government at the top and an object head representing the activity at the bottom. The intermediate levels represent sub-functions, programmes, schemes and sub-schemes. The functional classification is applicable to receipts as well as payments.
Since the Country follows a Plan based model of economy, the expenditure of Government is divided into Plan and Non-Plan. As the name suggests, the Plan expenditure is directly related to expenditure on schemes and programmes envisages in the plans. The Non-Plan expenditure is the expenditure incurred on establishment and maintenance activities.
Further distinction is made between the expenditure, which under the provisions of the Constitution, is subject to the vote of the legislature and the rest which is charged upon the Consolidated Fund of India.
Since the budget is on an annual basis, the accounts have to conform to it. The accounts are maintained on cash basis. Only the actual receipts realised and the payments made during the year are recorded.
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