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CMA Final · Corporate Financial Reporting · Government Accounting in India

Under the cash-based Government accounting followed by the Union, a department received Rs 50 lakh as a Central grant on 28 March, but the amount was credited to its bank account by the RBI on 2 April. The Government's financial year ends on 31 March. How is the receipt treated in the accounts of the year ending 31 March?

The receipt belongs to the next year, because Union Government accounts follow the cash basis, recording transactions only when money is actually received or paid. The sanction on 28 March does not create a receipt, and no receivable is booked under this system.

  1. ARecorded as receipt of that year because the sanction was issued on 28 March
  2. BRecorded as receipt of the next year because the cash was actually received on 2 AprilCorrect
  3. CRecorded half in each year
  4. DRecorded as a receivable asset of that year

Explanation

Government accounts of the Union are kept on cash basis, so receipts and payments are recorded in the year the cash actually passes. Since the amount was credited after 31 March, it belongs to the next year. Recognising it as a receivable would be accrual accounting, which is not followed in the Union accounts.

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