Corporate Financial Reporting · Government Accounting in India

Structure and Classification of Government Accounts in India

Updated 11 October 2026

Government accounts in India are kept in three parts: the Consolidated Fund, the Contingency Fund and the Public Account. Each transaction is coded through a six-tier classification: major, sub-major, minor, sub and detailed heads, plus object head. To solve questions, first find the fund, then the account type, then the head level.

Understand Structure and Classification of Government Accounts

A company keeps one set of books. The government cannot. Public money must be spent only with legislative approval, so the accounts are built around that control. This is why Indian government accounts are split into parts, and why each rupee is tagged with a code.

The accounts are kept in three parts. Consolidated Fund of India (Article 266(1) of the Constitution) holds all revenues received, loans raised and loan recoveries. Money leaves it only through an appropriation made by law. Contingency Fund (Article 267) is a separate fund created by law. It is an imprest placed at the disposal of the President (the Governor for a state) for urgent, unforeseen needs. It is later recouped by an appropriation that transfers the amount from the Consolidated Fund. Public Account (Article 266(2)) holds money the government receives as a banker or trustee, such as provident funds, small savings, deposits and remittances. This money does not belong to the government, so legislative appropriation is not needed to pay it out. States have the same three-part structure.

The Consolidated Fund is divided into the Revenue Account and the Capital Account, plus the account of public debt, loans and advances. Revenue account covers day-to-day receipts such as taxes and non-tax revenue, and expenditure on running services, interest and grants. Capital account covers expenditure that creates assets or reduces liabilities, and receipts such as disinvestment proceeds. Revenue expenditure does not create an asset. Capital expenditure does, or it reduces a liability.

The List of Major and Minor Heads of Account (LMMHA) is the official code book. The CAG prescribes the form of accounts of the Union and the states (Article 150). Major heads are four-digit codes. The bands are: 0020 to 1999 revenue receipts; 2000 to 3999 revenue expenditure; 4000 to 5999 capital expenditure; 6000 to 7999 public debt, loans and advances; and the 8000 series Contingency Fund and Public Account. Capital receipts such as borrowings and loan recoveries are not revenue receipts. They are recorded in the public debt, loans and advances band (6000 to 7999). Treat these bands as a recognition aid only and check the exact codes in the LMMHA, as numbering details can be updated.

Below the major head, the classification is usually described in six tiers: major head (function or sector), sub-major head (a sub-division of it), minor head (a programme), sub-head (a scheme), detailed head (a unit of the scheme) and object head (the nature of the expense, such as salaries or office expenses). The LMMHA prescribes only the major, sub-major and minor heads. The sub-head and detailed head are set by the departments under it, so they can vary by department. The object head is a separately standardised classification. The upper levels (major, sub-major and minor) show the function and programme, and the sub-head and detailed head narrow this down to the scheme and its unit. So these levels show what the money is for. The object head shows what the money is spent on.

Key rules to remember

Three parts of government accounts: Consolidated Fund (Art. 266(1)) + Contingency Fund (Art. 267) + Public Account (Art. 266(2)); Only Consolidated Fund and Contingency Fund transactions are the government's own money. The Contingency Fund is a separate fund created by law and placed at the disposal of the President (Governor for states). Public Account holds money received as banker or trustee.
Six-tier classification: Major head → Sub-major head → Minor head → Sub-head → Detailed head → Object head; Move from broad function to the nature of expense. The LMMHA prescribes the major, sub-major and minor heads. Departments set the sub-head and detailed head, and the object head is separately standardised. Quote the sequence in order.
Major head number ranges (broad guide): 0020–1999 revenue receipts; 2000–3999 revenue expenditure; 4000–5999 capital expenditure; 6000–7999 public debt, loans and advances; 8000 series Contingency Fund and Public Account; Use as a recognition aid only. Capital receipts such as borrowings and loan recoveries are recorded in the public debt, loans and advances band (6000–7999), not with revenue receipts. Check the exact codes and boundaries in the LMMHA if a question needs a specific code.
Revenue vs capital test: Creates an asset or reduces a liability = capital; otherwise = revenue; Applies to government expenditure classification. Receipts follow the same logic: borrowings and recoveries of loans are capital.
Fund test for payment: Consolidated Fund and Contingency Fund: payment needs legislative authority; Public Account: payment needs no appropriation; Contingency Fund is an advance and is recouped by a later appropriation.

How to solve Structure and Classification of Government Accounts questions

Use this order for any classification or structure question. It stops you from mixing funds, accounts and head levels.

1Read the question and mark what is asked: the part of accounts, the account type (revenue or capital), or the head level.
2Identify the fund. Is it the government's own money (Consolidated Fund), an emergency advance (Contingency Fund) or money held as banker or trustee (Public Account)?
3For Consolidated Fund items, decide revenue or capital. Ask whether an asset is created or a liability reduced.
4Place the item in the major head range by function. Receipts and expenditure sit in different number ranges.
5Go down the tiers: major, sub-major, minor, sub-head, detailed head, object head. State only the levels the question needs.
6Identify the object head for the nature of expense, such as salaries, travel or grants.
7Write a one-line reason for each classification. Examiners award marks for the reasoning.

Quickest way: Fund-Account-Head triage

When to use it: Use in MCQs and short-answer parts where you must classify an item in under a minute.

Ask: whose money is it? Government's own means Consolidated Fund. Held for others means Public Account.
Ask: does it create an asset or cut a debt? Yes means capital. No means revenue.
Use the number band only to confirm: 0020-1999 revenue receipts, 2000-3999 revenue expenditure, 4000-5999 capital expenditure, 6000-7999 public debt, loans and advances, and the 8000 series Contingency Fund and Public Account. Capital receipts such as borrowings and loan recoveries sit in the 6000-7999 band, not with revenue receipts. Check exact codes in the LMMHA.
If the question lists levels, remember the order: major, sub-major, minor, sub, detailed, object.
Eliminate options that put a level out of order or mix a Public Account item into the Consolidated Fund.

Common mistakes in Structure and Classification of Government Accounts

Treating provident fund deposits as government revenue.
The money passes through government books, so it looks like income.
Fix: It is a Public Account liability held as a trustee. Revenue goes to the Consolidated Fund only.
Saying the Contingency Fund is part of the Consolidated Fund.
Both are funds in the same Constitution and both need legislative backing.
Fix: They are separate funds. The Contingency Fund is an imprest that is recouped from the Consolidated Fund later.
Calling all grants given to states capital expenditure.
Large amounts are assumed to be capital, or the asset the state builds is assumed to make the grant capital for the giver.
Fix: Grants-in-aid given to states are classified as revenue expenditure in the giver's accounts, even when the state uses them to create assets, because the giver does not acquire an asset. The effective revenue deficit is a budget presentation concept. It adjusts the revenue deficit for grants used to create assets, but it does not change the classification in the accounts, where the grants stay revenue expenditure. Do not show such grants as capital expenditure.
Reversing the order of the six tiers or listing only five.
Students remember major and minor heads but forget sub-major and the object head.
Fix: Write the sequence as major, sub-major, minor, sub, detailed, object and memorise it as a single line.
Placing loans and advances given by government under revenue expenditure.
Money is paid out, so it feels like an expense.
Fix: Loans and advances are capital items. They create a financial asset, a recoverable loan, and sit in the public debt, loans and advances band (6000-7999).
Quoting exact head numbers confidently from memory.
Students try to memorise the full list.
Fix: Learn the bands and a few common examples. Use the reasoning, not the exact number, unless the question gives it.

Worked examples

Example 1

Classify the following into Consolidated Fund (Revenue Account), Consolidated Fund (Capital Account) or Public Account, giving reasons: (a) income tax collected; (b) amount paid for construction of a government hospital building; (c) deposits in the General Provident Fund of government employees.

Show the solution

(a) Income tax is a tax collected as the government's own receipt. It does not create a liability, so it is a revenue receipt in the Consolidated Fund.
(b) Construction of a hospital creates a fixed asset. It is capital expenditure in the Consolidated Fund and shown in the capital expenditure series (4000 to 5999 band).
(c) GPF money belongs to the employees. The government holds it as a trustee and must repay it. So it is a liability in the Public Account.
Check: only (c) can be paid out without a fresh appropriation by the legislature, while (a) and (b) belong to the Consolidated Fund.

Answer: (a) Consolidated Fund, Revenue Account. (b) Consolidated Fund, Capital Account. (c) Public Account.

Example 2

Explain the six-tier classification of government transactions using the example of the salary paid to a teacher in a state government primary school.

Show the solution

Major head: the broad function. The salary falls under major head 2202 General Education, in the revenue expenditure series (2000 to 3999 band).
Sub-major head: the sub-division of the function, here 01 Elementary Education.
Minor head: the programme, here 101 Government Primary Schools.
Sub-head: the specific scheme or activity under that programme, as set by the state department.
Detailed head: the unit of the scheme, such as a specific project or institution.
Object head: the nature of expense. Here it is salaries.
Conclusion: the major, sub-major and minor heads, with the sub-head and detailed head, say what the money is for. The object head says what it was spent on.

Answer: The salary is classified under major head 2202 General Education, sub-major head 01 Elementary Education and minor head 101 Government Primary Schools. It then goes through the sub-head and detailed head and finally to the object head salaries. The structure moves from function to nature of expense.

Exam tips

Learn the three parts with their Articles. A short answer that names Article 266(1), 266(2) and 267 reads as full marks.
MCQs often give a transaction and ask which fund or account it belongs to. Use the whose-money and asset-created tests.
Write the six tiers in order and add one example per tier in descriptive answers.
Do not quote head numbers unless sure. State the band and the reason instead.
In case scenarios, classify each item in a short table-style list of bullets, then total revenue and capital separately if figures are given.

Practice questions from Government Accounting in India

Structure and Classification of Government Accounts: frequently asked questions

What are the three parts of government accounts in India?

They are the Consolidated Fund, the Contingency Fund and the Public Account. The Consolidated Fund is the main fund for revenues and expenditure. The Contingency Fund is for urgent needs, and the Public Account holds money kept as a banker or trustee.

What is LMMHA?

LMMHA is the List of Major and Minor Heads of Account. It is the official code list used to classify receipts and expenditure of the Union and the states. Learn its structure and number bands rather than every code.

What is the difference between revenue account and capital account in government accounting?

Revenue account records routine receipts and expenditure that do not create assets or reduce liabilities. Capital account records expenditure that creates assets or reduces liabilities, and receipts such as borrowings and loan recoveries. The test is whether an asset is created or a liability changed.

What are the six tiers of classification of government transactions?

They are major head, sub-major head, minor head, sub-head, detailed head and object head. The classification moves from the broad function down to the nature of the expense.