Railway Accounts Department Examinations

Thursday, February 25, 2021

11th Zoom Meeting on the Topic - GeM - Government e-Marketplace on 28th February, 2021 at 6 PM

 








www.appendix3.com is inviting you to a scheduled 11th Zoom meeting

 

Topic: GeM - Government e-Marketplace

 

Time: Feb 28, 2021 (Sunday) 6 PM

 

Zoom Link 

Meeting ID: 853 5815 4262

Passcode: 591318


   Zoom Meetings  - Topics covered so far

Meeting

Date

Topic

1

20.12.2020

Introduction

2

27.12.2020

Budget

3

03.01.2021

Auditing

4

10.01.2021

Parliamentary Control

over Railway Finances

5

17.01.2021

Appropriation Accounts

6

24.01.2021

What is Demand ? What is Grant ?

What is Major Head ?

What is Sub Major Head ?

7

31.01.2021

Works Program & IRPSM 

8

07.02.2021

Railway Budget 2021-22 - An analysis

9

14.02.2021

Traditional Budget, Outcome Budget, ZBB,

 Integrated Budget,  Performance Budget

10

21.02.2021

Operating Ratio (Theory & Practical)





Internal Audit and Differences between Internal Check & Internal Audit

 Internal Audit 

And

 Differences between Internal Check & Internal Audit


Internal Audit:


Objectives:


  • A Service to Management

  • Provides assurance of an effective system of Internal Control that is not excessive.

  • Ensure reliability and integrity of accounting and financial system & Operating Performance. 

  • Ensure compliance with policies, plans, procedures, laws & regulations. 

  • Ensure adequacy of arrangements for safeguarding the Assets.

  • Facilitate prevention & detection of frauds. 

  • Highlight the deficiencies (in the system, control, practices etc), 

  • Efficiency & scope for economy in the utilisation of resources. 


Internal Audit Cell


  • Functioning at Hqrs as well as Divisions. 

  • Normally consists of one SSO, One TIA and one ISA under the control of Dy.CAO/G or Sr.DFM

  •  Theme Based Audit is one of the Important function of the Internal Audit Cell



Differences between Internal Check & Internal Audit



SN

Internal Check

Internal Audit

1

Check of Day to Day transactions.  Work of One person is proved independendently or complementary to the work of another

Selected few topics - Checking in all aspects to ensure effectiveness of System, Compliance of policies & Prevention of frauds.

2

Checking by the Same section staff

Review activity carried out by Persons totally independent of Internal check personnel

3

Frequency  Daily/Regular Basis

Frequency - Periodic Basis

4

Built in device

Not built in device

5

Object: Early detection of fraud or prevention of frauds at the time of passing Bills

Suggests System improvement & ensure compliance, service to the Management, Compliance of policies

6

Checking every aspect

Checking few selected topics thoroughly(in all aspects) in order to achieve the object of System improvement/Service to Management

7

Object: Narrow

Object: Broad

8

Basis: Transaction/Bill/Event

Basis: System as a whole


Operating Ratio - Theory & Practical

 

O.R.  -  Operating Ratio in Indian Railways

 

Likely Questions:

 

1. What is Operating Ratio ? How it is calculated ?

2.  Computation of the Operating Ratio from the set of figures given in the problem.

3.Is OR, best financial ratio to show the performance of Railways ? If answer is No, what is the reason and which one is the alternative one ?

4. Can we extends the O.R to the Divisions in replacement of PEI (Performance Efficiency Index) ? If so what is the mechanism and the benefits accrue to Railways ? 

 

Now let's check the answers:

 

1. What is Operating Ratio ? How it is calculated ?

 

ü  Codal provisions - Para 308 & 434 of I.Rly.Finance Code.

 

ü  It is regarded as one of the Most Important financial statistics/ratios and has frequently been used as an Index of the operating efficiency of the Railways.

 

ü  Definition of O.R.: Percentage of Gross Working Expenses to Gross Earnings of any accounting year. In general, Operating ratio is the number of rupees spent to earn every 100 Rupees.

 

ü  If O.R.  is less than 100 = Organisation is in profits.

ü  If O.R. is more than 100 =  Organisation is in losses.

 

ü  Definition of Gross Working Expenses (GWE):  Ordinary Working Expenses-OWE (Demands 3 to 13) plus Appropriations to DRF-Depreciation Reserve Fund and Pension Fund.  Note: True expenses in an accounting period whether or not actually disbursed.  That means excludes Suspense.

 

ü  Definition of Gross Earnings: Coaching Earnings (Abstract X) + Goods Earnings (Abstract Y) + Sundry other Earnings (Abstract Z)  Note: true or accrued earnings in an accounting period whether or not actually realised. That means excludes  Suspense.

 

ü   Always considered Apportioned Earnings instead of Originating Earnings.

 

              Gross Working Expenses

ü  O.R  =     _______________________    x  100

                  Gross Earnings

 

ü  There is no ideal Operating Ratio for Indian Railways.  In rail road sector, an operating ratio of 80 or lower is considered desirable. However lower O.R. helps in generating internal resources for meeting requirement of Plan Expenditure on Safety (RSF), Amenities to Passengers & Staff (D.F) and other Capital investments such as laying of new lines, acquisition of Rolling Stock etc (Capital Fund).

 

ü  In the year 2005, Indian Railways, changed its accounting policy for the lease charges. The lease charges have been broken into two parts - capital and revenue. While revenue has been charged to working expenses (Demand No.9G), capital portion is separately provided for in the capital budget ( Plan Head 2200-Leased assets -  Payment of  capital component of lease charges to IRFC etc.). This has resulted in the reduction of working expenses and the operating ratio.

 

ü  Measures to be taken to achieve the Lower/efficient O.R. are

 

A) maximizing the traffic earnings inter-alia include rationalization of fare and freight tariff; effective marketing strategies to capture more and more traffic; creation of additional capacity and optimum utilization of the existing rail infrastructure.

 

B) contain the expenditure through diverse means including strict economy and austerity measures; improved man-power planning; better asset utilization and inventory management; optimizing the fuel consumption etc. 

 

ü  The Best ever O.R of Indian Railways was 74.7 % in 1963-64.

 

ü  Comparing O.R of Indian Railways with other countries ' railways systems  - Not possible due to different computation methodologies across different countries thus reducing validity of comparison of such statistical figures.

 

Glossary - Excerpts from Finance Code Para No.308 -  better to understand Operating Ratio and Railway finances.

 

Credit Side

Debit Side

Net of Credit & Debit

(i) Coaching Earnings (less refunds)

(x) Ordinary Working Expenses = Expenses booked under final heads, excluding appropriation to DRF & Pension Fund

 

(ii) Goods Earnings (less refunds)

(xi) Appropriation to Depreciation Reserve Fund.

 

(iii) Traffic Earnings = (i)+(ii)

(xii) Appropriation to Pension Fund.

 

(iv) Sundry Other Earnings (less refunds)=Other than Traffic Earnings.

 

 

(v) Gross Earnings = (iii)+(iv) = true or accrued earnings in an accounting period whether or not actually realized.

(xiii) Gross Working Expenses = (x)+(xi)+(xii) = True expenses in an accounting period whether or not actually disbursed.

(xviii)  Net Earnings =(v) - (xiii)

 

       

O.R = (Xiii) /(v) x 100

       

(vi) Suspense.

(xiv) Suspense.

 

(vii) Gross Receipts = (v)+(vi) = Earnings actually realized during an accounting period.

 (xv)

Gross Expenditure = (xiii) + (xiv) = Working Expenses actually disbursed during an accounting

period.

 

(viii)Misc. Receipts = Guarantee recoverable from State Govts. + Other Misc. Receipts, such as Govt. share of surplus profits, sale of  land of subsidized companies, receipts from surcharge on Passenger fares, etc.

(xvi) Misc. expenditure = Surveys + Land for subsidized companies; subsidy + other

Miscc Railway expenditure, Appropriations to Pension Fund relating to Railway Board

and Miscc establishments booked under grants 1 & 2 and Accident Compensation, Safety

and Passenger Amenities Fund and OLWR expenditure, and payments to

worked lines.

 

(ix) Total Revenue Receipts = (vii)+(viii).

 

(xvii) Total Revenue Expenditure = (xv)+(xvi).

(xix) Net Receipts =

 (ix) - (xvii).

 

 

 

 

 (xix) Net Receipts = (ix) - (xvii).

(xx) Payment to General Revenues (Dividend)

 

(xxi) Surplus =

 (xix) - (xx)

 

(shortfall if the figure is negative)

Note: From 2017-18 onwards, the Railway Budget has merged with General Budget. Hence there is no Dividend payable. Hence Net Receipts/Net Revenue becomes Surplus.

Appropriation of Surplus:  The surplus will be appropriated to Development Fund, Railway Safety Fund, Capital Fund and latest created fund " Railway Liability Reserve Fund.

ü  Comparing O.R of different Zonal Railways:  It is not possible to compare the O R of one Zonal Railway with another Zonal Railway due to several factors such as Floods, Accidents and other special factors.  Hence it is better to compare OR of particular Zonal Rly from Year - Over - Year (YOY) basis.

 

 

 

In simple terms , the Operating Ratio is calculated based on the following glossary terms only

 

Denominator

Numerator (Gross Working Expenses)

1.Gross Earnings

1.OWE - Ordinary Working Expenses i.e., 3 to 13 Demands

 

2. Appropriation to DRF & Pension Fund i.e., D.No.14

Formulae of OR = Gross Working Expenses \ Gross Earnings x 100

Forget the following Glossary terms of calculation of O.R.

Never taken the following items for calculation of Operating Ratio

Earnings Side

Expenditure side

Suspense

Suspense

Gross Receipts

Gross Expenditure

Misc. Receipts

Misc. Expenditure

 

Dividends paid to Gen. Revenues

 

Appropriation to D.F, Safety Fund, Capital Fund

 

2. Working out the following from the set of figures as given below.

i) Operating Ratio  ii) Net Receipts  iii ) Surplus/Shortfall

 

Details

Amount(In Crores of Rs.)

1. Gross Receipts

1400

2. Suspense - Earnings

150

3. Misc. Receipts

50

4. Expenditure (Actual basis)

800

5. Suspense - expenses

(- ) 50

6. Appropriation to DRF

65

7.Appropriation to Pension Fund

85

8. Misc. Expenditure

25

9.Dividends payable

75

10. Appropriation to D.F.

150

11. Appropriation to R.S.F.

100

12. Appropriation to Capital Fund

150

 

Solution:

i) Operating Ratio

Formulae of  OR  =  Gross Working Expenses / Gross Earnings x 100

Gross Earnings = Gross Receipts minus Suspense

Hence  1400 -  150 = 1250 is Gross Earnings.

Gross Working Expenses = Ordinary Working Expenses(OWE) + App. to DRF & P.F

Ordinary Working Expenses ( OWE)  =  Actual Expenditure  minus  Suspense

=  800  -  (-) 50 = 850  (Note: Minus of Minus = Plus)

Gross Working Expenses = OWE + App. to DRF & Pension Fund.

Gross Working Expenses  =  850 + 65 + 85 = 1000

Hence O.R . =  1000 / 1250 x 100 = 80 %

ii) Net Revenue

Net Revenue = Total Revenue Receipts - Total Revenue Expenditure

Total Revenue Receipts = Gross Receipts + Misc Receipts.

= 1400 + 50 = 1450

Total Revenue Expenditure = Gross Expenditure + Misc. Expenditure

Gross Expenditure =  800 + 65 + 85 = 950 and Misc. Expenditure  = 25

Total Revenue Expenditure   =   950 + 25  = 975

Net Revenue = Total Revenue Receipts - Total Revenue Expenditure

Net Revenue = 1450 - 975  =  475

iii) Surplus/Shortfall

Surplus  =  Net Revenue - Dividends Payable

=  475  -  75  =  400

Surplus  =  400

Note: Appropriation to Development Fund, Railway Safety Fund & Capital Fund will not be considered for calculation of Operating Ratio/Net Revenue/Surplus.

3. Is OR, best financial ratio to show the performance of Railways ? If answer is No, what is the reason and which one is the alternative one ?

ü  It is true, that the Operating Ratio itself is not a perfect indicator for judging the efficiency of Indian Railways.

ü  Let's see the below hypothetical illustration of two Railways.

 

Rly.

Capital at Charge

Gross Earnings

Gross Working expenses

O.R.

ROR- Rate of Return/ROCE-Return on Capital Employed

A

1000

200

150

75 %

5 % i.e., Rs.50 profit on Capital of Rs.1000

B

5000

2000

1600

80 %

8 % i.e., Rs.400 profit on Capital of Rs. 5000

 

ü  Considering the Operating Ratio as efficient indicator, Railway "A" is more efficient than Railway "B".  But taking ROR/ROCE i.e.,  indicator of utilisation of Capital, Railway "B" is more efficient than Railway "A".

 

ü  If so, as mentioned in Para 511 of Indian Railways Administration and Finance - An Introduction, Return on Capital i.e., percentage of (revenue) surplus to  Capital-at-charge is the true indicator to judge the financial performance of Indian Railways.

 

ü  Revenue Surplus = Net Receipts (actual basis) after adjusting misc receipts and misc expenditure and payment of Dividend to General Revenues. (item xxi of para 308-Finance Code)

 

ü  Capital at Charge means "the Central Government's investment in the Railways by way of Loan Capital and value of the assets created there from. (item xxii  of para 308-Finance Code)

 

ü  To sum up, the combination of above two Ratios will be considered to evaluate the performance of the Railways instead of Operating Ratio alone.

 

ü  Operating Ratio is helpful for comparing the Railways' efficiency of Year-over-year(YOY) as well as evaluating the Inter Zonal comparison among different  Zonal Railways in India.

4. Can we extends the O.R to the Divisions in replacement of PEI (Performance Efficiency Index) ? If so what is the mechanism and the benefits accrue to Railways ? 

DIVISIONS and PEI - Performance Efficiency Index

ü  At present, PEI is the performance indicator in the Divisions ( like OR-Operating Ratio for Zonal railways)

ü  As of today, OR is not being calculated for Divisions and thus they cannot be treated as “Profit Centers”.

ü  PEI =  a ratio of Demands  3 to 12 and  Originating Earnings . 

ü  That means unlike Operating Ratio, Appropriation to DRF and Pension Fund will not be considered for calculating PEI.  Also Apportioned Earnings not considered for calculating PEI.

                         Demands 3 to 12

ü  PEI of Division =     _______________________    x  100

                       Originating Earnings

                  

Operating Ratio - OR

Performance Efficiency Index-PEI

1. D.No. 3 to 13 considered

1. D.No. 3 to 12 only considered.

2. Considered Apportioned Earnings

2. Considered  Originating Earnings.

3. Appropriation to DRF & Pension Fund are considered.

3. Appropriation to DRF & Pension Fund are not considered.

4. Calculated for Zonal Railways

4. Calculated for Divisions

5. Formulae = GWE-Gross Working Expenses /Gross Earnings x100.

GWE = OWE + Appropriation to DRF & Pension Fund

OWE= 03 to 13 Demands.    

5. Formulae= Demands 03 to 12/ Originating Earnings x 100

                       

Note: In some Zonal Railways like SCR, D.No.13 also included for calculating PEI.

So, the drawbacks and their solutions for computing Operating Ratio of their respective Divisions are

1. Appropriation to DRF -

Appropriation to DRF from the Division can be computed as:

 

Capital at Charge on the Division / Capital at Charge on the Zone  x Appropriation to DRF for the Zone.

  

              

 

 

2. Appropriation to Pension Fund -  It would be possible to calculate the Appropriation to Pension Fund from the Division based on the

 

Pensionable employees on Division /Pensionable employees on the Zone  x Appropriation to Pension Fund.

 

 

                                                                                                                                                     

 

 

 

 

 

3. Apportioned Earnings  - Right now, based on the proportionate distance of consignment or passenger travelled over the Zonal Railways, the apportioned earnings can be calculated for the Zonal Railways. The same mechanism will apply for calculate of apportioned earnings for the Divisions based on distances covered among Divisions within a Zonal Railway.  With the help of Computers, it can be very easy exercise.

  • If we address the above drawbacks in correct approach as stated above, Divisions also can able compute Operating Ratio (OR) and became Profit Centers similar to Zonal Railways.  Because,

 

" What cannot be measured, cannot be managed"  By  Peter Drucker/ Deming

"If you cannot measure it, you can’t improve it"  By  Lord Kelvin  

 

 

                                                                             *****

2020-21 Railway Revenue Budget - Financials

 

SN

Receipts

Amount

(Rs. in Crores)

Percentage

 

SN

Expenditure

Amount

(Rs. in Crores)

Percentage

1

Coaching Earnings

67500

30 %

 

1

Ordinary Working Expenses

163157.17

75 %

2

Goods Earnings

147000

65 %

 

2

Appropriation to DRF

800

1 %

3

Sundry Earnings

11013

5 %

 

3

Appropriation to Pension Fund

53160

24 %

4

Gross Earnings (1+2+3)

225513

100 %

 

4

Gross Working Expenses (1+2+3)

217,117.17

100 %

5

Suspense

100

 

 

5

Suspense

- 404.17

 

6

Gross Receipts (4+5)

225613

 

 

6

Gross Expenditure (4+5)

216713

 

7

Misc Receipts

300

 

 

7

Misc. Expenditure

2700

 

8

Total Receipts (6+7)

225913

 

 

8

Total Expenditure

219413

 

 

Net Revenue = Total Receipts - Total Expenditure

Net Revenue = 225913 - 219413

Net Revenue = 6500

Rs. 6500 Crores Net Revenue is appropriated to

1.       Development Fund - Rs. 1500 Crores

2.       RRSK - Rashtriya Rail Sanraksha Kosh - Rs. 5000 Crores

Nil appropriations to Capital Fund and RSF - Railway Safety Fund

Operating Ratio = Gross Working Expenses / Gross Earnings x 100

Operating Ratio = 217117.17 / 225513 x 100

Operating Ratio = 96.28 %

Highest & Lowest Operating Ratio of Zonal Railways

Zonal Railway

OR

Rank

Metro Railway, Kolkata

250.3

HIghest

Eastern Railway, Kolkata

171.1

Second Highest

East Coast Railway, Bhubaneswar

50.9

Lowest

South East Central Railway, Bilaspur

52.3

Second Lowest

                             (2016 Books & Budget- Without Books -5 marks)

 

Books & Budget 2016 (Without Books) - Operating Ratio Problem

 

(compulsory question 20 marks)

 

Qn.  Given below are the financial results of Railways for a financial year

 

                                                                (All figures in Rs. Crores)

SN

Particulars

Amount (in crores of Rs.)

1

Gross Receipts

12005

2

Suspense earnings

3

3

Misc receipts

101

4

Ordinary Working Expenses

8812

5

Suspense expenses

19

6

Appropriation to DRF

473

7

Appropriation to Pension Fund

1948

8

Misc Expenditure

7

9

Dividends payable

228

 

Work out the following from the above figures:

A.      Operating Ratio

B.      Net Revenue

C.      Excess / Shortfall

D.      Total Working Expenses

 

Solution:

Ready reckoner for calculation of Operating Ratio

(All figures in Rs. Crores)

SN

Particulars

formulae

Amount

SN

Particulars

formulae

Amount

Finding

1.

Coaching Earnings (less refunds)

10

OWE - Ordinary Working Expenses

8812

2.

Goods Earnings (less refunds)

11

Appropriation to DRF

473

3

Traffic Earnings

(1 + 2)

12

Appropriation to Pension Fund

1948

4

Sundry Other Earnings (less refunds)

5

Gross Earnings

(3 + 4)

12002

13

Gross Working Expenses

(10 + 11 + 12)

11233

O.R = 13/5 x 100= 11233/

12002 X 100 = 93.59 %

6

Suspense

3

14

Suspense

19

7

Gross Receipts

(5 + 6)

12005

15

Gross Expenditure

(13 + 14)

11252

8

Miscellaneous Receipts

101

16

Miscellaneous Expenditure

7

9

Total Revenue Receipts

(7 + 8)

12106

17

Total Revenue Expenditure

(15 + 16)

11259

Net Revenue/Net Receipts

 = 9 - 17 = 12106-11259= 847

 

Excess /Surplus = Net Revenue/Net Receipts minus Dividends payable.

 

Excess / Surplus =   847-228 = 619

 

Hence Answers are

 

 1) Operating Ratio = 93.59 % ( GWE/Gross Earnings x 100 = 11233/12002 X 100)

 

2) Net Revenue = 847 Crores of Rs. (Total Revenue Receipts - Total Revenue Expenditure = 12106-11259)

 

3) Excess = 619 Crores of Rs.  (Net Revenue - Dividends payable =  847 - 228)

 

4) Total Working Expenses/Gross Working Expenses = 11233 Crores of Rs.

        (OWE + Appn to DRF & Pension Fund=8812 +473 + 1948 )

 

*****

 

 

Books & Budget 1982 (With Books) - Operating Ratio Problem

 

Qn.  Work out the Operating Ratio of Railway "A" from the following data.

 

                                                                (All figures in Rs. Crores)

Particulars

Amount

Capital at charge

702.30

Passenger earnings

125.80

Other coaching earnings

17.50

Goods earnings

158.30

Sundry other earnings

11.50

Suspense

- 1.80

Ordinary Working Expenses (OWE)

269.80

Suspense

- 0.30

Appropriation to DRF

52.08

Appropriation to Revenue Fund

15.25

Payment to General Revenues

5.80

 

What Additional information is required to work out a surplus or shortfall ?

Solution:

 

 

 

 

 

 

Ready reckoner for calculation of Operating Ratio

(In Rs. of Crores)

SN

Particulars

formulae

Amount

SN

Particulars

formulae

Amount

Finding

1.

Coaching Earnings (less refunds)

143.30

10

OWE - Ordinary Working Expenses

269.80

See Notes for calculation of OWE

2.

Goods Earnings (less refunds)

158.30

11

Appropriation to DRF

52.08

3

Traffic Earnings

(1 + 2)

301.60

12

Appropriation to Pension Fund

0.00

4

Sundry Other Earnings (less refunds)

11.50

5

Gross Earnings

(3 + 4)

313.10

13

Gross Working Expenses

(10 + 11 + 12)

321.88

O.R = 13/5 x 100= 321.88/313.10 x 100 = 102.80 %

6

Suspense

- 1.80

14

Suspense

- 0.30

7

Gross Receipts

(5 + 6)

311.30

15

Gross Expenditure

(13 + 14)

321.58

8

Miscellaneous Receipts

16

Miscellaneous Expenditure

9

Total Revenue Receipts

(7 + 8)

17

Total Revenue Expenditure

(15 + 16)

Net Revenue/Net Receipts

 = 9 - 17 =

 

Surplus = Net Revenue/Net Receipts minus Dividends paid.

 

Surplus =   

 

Hence Answers are

 

 1) Operating Ratio = 102.80 %

2) Additional information such as Misc. Receipts & Misc Expenditure is required to find out surplus or shortfall.

 

Notes:

 

1. Coaching Earnings = Passenger earnings + other coaching earnings = 125.80 +17.50 = 143.30

 

 

 

 

 

Books & Budget 2006 (Without Books) - Operating Ratio Problem (compulsory) - 20 marks

 

Qn.  Given below are the financial results of two Railway Zones A & B:-

                                                                (All figures in Rs. Crores)

 

Details

A

B

Originating Earnings

5000

6000

Apportioned Earnings

3800

4000

Traffic Suspense

75

100

Ordinary Working Expenses (Demands 3 to 13)

2800

3200

Appropriation to DRF

225

450

Appropriation to Pension Fund

120

310

 

Calculate the Operating Ratio of the above two zones.  What are your inferences regarding the performance of the above railways ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Solution:

 

Ready reckoner for calculation of Operating Ratio of Zonal Railway A

 

SN

Particulars

formulae

Amount

 

SN

Particulars

formulae

Amount

Finding

1.

Coaching Earnings (less refunds)

 

 

10

OWE - Ordinary Working Expenses

 

2800

 

2.

Goods Earnings (less refunds)

 

 

11

Appropriation to DRF

 

225

 

3

Traffic Earnings

(1 + 2)

 

12

Appropriation to Pension Fund

 

120

 

4

Sundry Other Earnings (less refunds)

 

 

 

 

 

 

 

5

Gross Earnings

(3 + 4)

3800

13

Gross Working Expenses

(10 + 11 + 12)

3145

O.R = 13/5 x 100= 3145/3800x100 = 82.76 %

6

Suspense

 

75

14

Suspense

 

0

 

7

Gross Receipts

(5 + 6)

3875

15

Gross Expenditure

(13 + 14)

3145

 

8

Miscellaneous Receipts

 

0

16

Miscellaneous Expenditure

 

0

 

9

Total Revenue Receipts

(7 + 8)

3875

17

Total Revenue Expenditure

(15 + 16)

3145

Net Revenue/Net Receipts

 = 9 - 17 = 3875-3145 = 730

 

 

 

 

 

 

 

Ready reckoner for calculation of Operating Ratio of Zonal Railway B

 

SN

Particulars

formulae

Amount

 

SN

Particulars

formulae

Amount

Finding

1.

Coaching Earnings (less refunds)

 

 

10

OWE - Ordinary Working Expenses

 

3200

 

2.

Goods Earnings (less refunds)

 

 

11

Appropriation to DRF

 

450

 

3

Traffic Earnings

(1 + 2)

 

12

Appropriation to Pension Fund

 

310

 

4

Sundry Other Earnings (less refunds)

 

 

 

 

 

 

 

5

Gross Earnings

(3 + 4)

4000

13

Gross Working Expenses

(10 + 11 + 12)

3960

O.R = 13/5 x 100= 3960/4000 x 100 = 99 %

6

Suspense

 

100

14

Suspense

 

0

 

7

Gross Receipts

(5 + 6)

4100

15

Gross Expenditure

(13 + 14)

3960

 

8

Miscellaneous Receipts

 

0

16

Miscellaneous Expenditure

 

0

 

9

Total Revenue Receipts

(7 + 8)

4100

17

Total Revenue Expenditure

(15 + 16)

3960

Net Revenue/Net Receipts

 = 9 - 17 = 4100 - 3960 = 140

 

 

 

 

 

 

 

 

 

 

Inferences:

 

Details

A

B

Inferences

Apportioned Earnings

3800

4000

 

Ordinary Working Expenses (Demands 3 to 13)

2800

3200

 

Ratio of OWE to Apportioned Earnings

2800/3800 x 100 = 74 %

 

3200/4000 x 100 = 80 %

Control Over Expenditure is more evident in case of Zonal Railway A compare to Zonal Railway B

Appropriation to DRF

225

450

Considering the depreciation, the Zonal Railway B is having more assets. But apportioned earnings of both railways almost the same.  That means utilization of Assets is not optimum in case of Zonal Railway B

Appropriation to Pension Fund

120

310

Considering the appropriations to Pension Fund, Zonal railway B has more retired personnel than Zonal Railway A.  But the apportioned earnings of both railways are almost the same.

Operating Ratio

82.76 %

99 %

Considering the above facts, Zonal Railway B is less efficient than Zonal Railway A.

 

Finally, Zonal Railway B should have  taken steps for utilization of their assets more efficiently and control their expenditure (OWE) to reduce the Operating Ratio.

 

                                                                                ******

Books & Budget 2005 (Without Books) - Operating Ratio Problem

Qn.  Work out following from the set of figures given below.

A) Operating Ratio

B) Net Receipts

 C) Surplus/shortfall

 

                                                                (All figures in Rs. Crores)

Particulars

Amount

Gross Receipts

1908

Suspense earnings

186

Misc receipts

57

Actual expenditure

1278

Suspense expenses

48

Appropriation to DRF

67

Appropriation to Pension Fund

81

Misc Expenditure

23

Dividends payable

73

Appropriations to DF

144

Appropriations to RSF

98

Appropriations to Capital Fund

144

Solution:

Ready reckoner for calculation of Operating Ratio

 

SN

Particulars

formulae

Amount

 

SN

Particulars

formulae

Amount

Finding

1.

Coaching Earnings (less refunds)

 

 

10

OWE - Ordinary Working Expenses

 

1230

See Notes for calculation of OWE

2.

Goods Earnings (less refunds)

 

 

11

Appropriation to DRF

 

67

 

3

Traffic Earnings

(1 + 2)

 

12

Appropriation to Pension Fund

 

81

 

4

Sundry Other Earnings (less refunds)

 

 

 

 

 

 

 

5

Gross Earnings

(3 + 4)

1722

13

Gross Working Expenses

(10 + 11 + 12)

1378

O.R = 13/5 x 100= 1378/1722 X 100 = 80.02 %

6

Suspense

 

186

14

Suspense

 

48

 

7

Gross Receipts

(5 + 6)

1908

15

Gross Expenditure

(13 + 14)

1426

 

8

Miscellaneous Receipts

 

57

16

Miscellaneous Expenditure

 

23

 

9

Total Revenue Receipts

(7 + 8)

1965

17

Total Revenue Expenditure

(15 + 16)

1449

Net Revenue/Net Receipts

 = 9 - 17 = 1965 - 1449 =516

 

Surplus = Net Revenue/Net Receipts minus Dividends paid.

Surplus =   516 - 73 = 443

Hence Answers are

 1) Operating Ratio = 80.02 %

2) Net Receipts = 516

3) Surplus = 443

 

Notes:

1 ) Finding OWE - Ordinary Working Expenses

OWE + Suspense = Actual Expenditure (similar to GWE + Suspense = Gross Expenditure)

OWE + 48 = 1278

OWE = 1278-48 = 1230

2 ) However Surplus 443 had a balance of 57, after

i) appropriation to DF - 144                                         }

ii) appropriation to RSF - 98                                        } Total of 144+98+144 = 386 only against surplus 443

iii) appropriation to Capital Fund - 144                  }

 

 

 

 

 

 

 

Operating Ratio  (O.R) - Practical problem - 20 marks  - Compulsory

2012 year optional Books & Budget (without Books) Question paper

1. Given below are the financial results of Railways for the years 2007-08 and 2008-09.

                                                Figures in Crores of Rs.

Particulars

2007-08

2008-09

Gross Earnings

71645

79837

Traffic Suspense

75

25

Gross Traffic Receipts

71720

79862

Miscellaneous Receipts

1557

1797

Ordinary Working Expenses-OWE

41033

54349

Appropriation to DRF

5450

7000

Appropriation to Pension Fund

7979

10490

Miscellaneous Expenditure

480

645

Net Revenue

18334

9174

Dividend Paid

4903

4718

 

a) From the above figures, calculate the Operating Ratio for 2007-08 and 2008-09.

b) Comment on performance of the railway in 2008-09 compared to 2007-08, giving possible reasons for improvement /deterioration.  Calculate the amount available for sourcing of capital expenditure in each year and how is it normally allocated.

Ready reckoner for calculation of Operating Ratio

SN

Particulars

formulae

Amount

 

SN

Particulars

formulae

Amount

Finding

1.

Coaching Earnings (less refunds)

 

 

10

OWE - Ordinary Working Expenses

 

 

 

2.

Goods Earnings (less refunds)

 

 

11

Appropriation to DRF

 

 

 

3

Traffic Earnings

(1 + 2)

 

12

Appropriation to Pension Fund

 

 

 

4

Sundry Other Earnings (less refunds)

 

 

 

 

 

 

 

5

Gross Earnings

(3 + 4)

 

13

Gross Working Expenses

(10 + 11 + 12)

 

O.R = 13/5 x 100

6

Suspense

 

 

14

Suspense

 

 

 

7

Gross Receipts

(5 + 6)

 

15

Gross Expenditure

(13 + 14)

 

 

8

Miscellaneous Receipts

 

 

16

Miscellaneous Expenditure

 

 

 

9

Total Revenue Receipts

(7 + 8)

 

17

Total Revenue Expenditure

(15 + 16)

 

Net Revenue

 = 9 - 17

Surplus = Net Revenue minus Dividends paid.  (Shortfall if the figure is negative)