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CMA Final · Corporate Financial Reporting · Government Accounting in India

A State Government's Contingency Fund corpus is Rs 400 crore. During the year it advanced Rs 90 crore for flood relief before legislative approval, and the Legislature later approved the expenditure through a Supplementary Appropriation. Before any recoupment, what is the position of the Contingency Fund and what happens on approval?

The Contingency Fund falls to Rs 310 crore after the Rs 90 crore advance. When the Legislature approves the expenditure through a Supplementary Appropriation, Rs 90 crore is drawn from the Consolidated Fund and credited back, restoring the corpus to Rs 400 crore.

  1. AThe Fund stands at Rs 490 crore, and the approved amount is added from the Public Account
  2. BThe Fund stands at Rs 310 crore, and on approval Rs 90 crore is recouped to it from the Consolidated FundCorrect
  3. CThe Fund stays at Rs 400 crore because advances are recorded only as memorandum entries, with no recoupment
  4. DThe Fund stands at Rs 310 crore, and on approval the Rs 90 crore is written off and the corpus permanently reduced

Explanation

The advance of Rs 90 crore reduces the balance: 400 - 90 = Rs 310 crore. When the Legislature approves the expenditure via appropriation from the Consolidated Fund, the amount is drawn from it and credited back to the Contingency Fund, restoring Rs 400 crore. Options 3 and 4 ignore recoupment, and option 1 adds instead of deducting.

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