Classification / Allocation of Revenue Expenditure - Explained

 

Classification and Allocation of Expenditure in Indian Railways

(With Simplified Domestic Analogy for Better Understanding)

1.     Introduction

Classification and allocation of expenditure form the foundation of railway financial accounting. The system ensures that every rupee spent is properly identified under its appropriate accounting head — right from Major Head to Object Head (Primary Unit) — as prescribed in Indian Railways Financial Code, Volume II.   Click for F2 - Financial Code Volume Two

For easy comprehension, this complex structure can be compared with how a family categorizes its household expenses — groceries, rent, school fees, travel, etc. Similarly, Indian Railways classifies its expenditure systematically for transparent financial control and reporting.

2. Structure of Classification

The standard Railway accounting classification follows this order:
Major Head → Sub-Major Head → Minor Head → Sub Head → Detailed Head → Object Head (Primary Unit).
Each head serves a unique purpose in identifying the nature, function, and object of expenditure.

2.     Comparative Table: Railway vs Household Classification

Level of Classification	In Indian Railways (Financial Code Volume II)	Household Analogy
Major Head (MH)	Broad category like 3002 – Working Expenses, 5002 – Capital Outlay	Total household expenditure – daily vs capital items like groceries vs furniture
Classification starts from here
First part – erstwhile Demand 03 of 03 – 113 - 18
Sub-Major Head (SMH) / Erstwhile Demand	Divisions within Major Head – e.g., erstwhile Demands 03 to 14 (Sub Major Heads 01 to 12)	Broad household categories like rent, groceries, education, travel
Second part – MH/SH/DH 113 of 03 – 113 - 18
Minor Head (MH)	Functional divisions – Admin, Finance, Personnel, Engineering	Subcategories of groceries – cereals, pulses, vegetables, dairy, etc.
Sub Head (SH)	Specific offices or units – GM Office, DRM Office, Vigilance, Legal cell, Work study etc	Further division of cereals – rice, wheat, millets, etc.
Detailed Head (DH)	Specific item/service – Gaz. Officers, Non-Gaz. Staff, Contingencies etc	Types of rice – basmati, raw, boiled, unpolished, etc.
Third & Final part – PU 18 of 03 – 113 - 18
Object Head (Primary Unit)	Purpose of spending – Pay, Allowances, Office Expenses, Travel	Mode of purchase – home-grown, purchased, from stock, exchanged

3.     Illustrative Example of a Railway Allocation

 

Head of Account	Code	Explanation
Major Head	3002	IR Working Expenses – Commercial Lines
Erstwhile Demand	03	General Superintendence & Services (SMH 01)
Minor Head	100	General Administration
Sub Head	110	GM Office
Detailed Head	113	Office Contingencies
Object Head	18	Office Expenses

 

Full Classification Example: 03-100-110-113-18 → 03 – 113 - 18 Office Expenses for GM Office under General Administration.

  

 4.     Key Points for Academic Understanding

 

Concept	Explanation
Purpose	Ensures financial discipline, transparency, and accountability.
Utility	Facilitates budget control, monitoring, and comparison across Railways.
Uniformity	Aligns with Government of India’s standard heads of account.
Example	Classification like 03-100-110-113-18 / 03-113-18 clearly shows the flow from function to expenditure item.
Audit Relevance	Helps internal and external audit track expenditure purpose accurately.

5.     Conclusion

Understanding the classification of expenditure is simplified when related to practical analogies. Just as families categorize expenses to maintain order, Indian Railways uses a hierarchical classification system to ensure efficient budgeting, control, and audit compliance.

This structure, prescribed in Indian Railways Financial Code Volume II, forms the backbone of Railway accounting and financial management.