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.
