Railway Accounts Department Examinations

Showing posts with label accrual accounting. Show all posts
Showing posts with label accrual accounting. Show all posts

Wednesday, July 8, 2020

FAR - Fixed Asset Register


FAR  - Fixed Asset Register




·         Fixed Assets occupies significant portion of Total Assets (Fixed Assets + Current Assets) in Indian Railways.

·         Compiling FAR is the important stage in the implementation of Accrual Accounting in Indian Railways.

·         All the Fixed Assets that are in existence as at the end of the year i.e., before adopting the Accrual Accounting in IR shall have brought to the FAR.  So that closing balances of previous year Asset Heads forms Opening Balances of current year Balance Sheet.

·         Definition of Fixed Assets   - IGFRS 2 (Indian Govt Financial Reporting Standards) issued by GASAB – Govt Accounting Standards Advisory Board  is

1.       The Property Plant & Equipment
2.       It should be tangible
3.       Held by an entity for use in Production / Supply of Goods & Services / for Rental to others / Administrative purpose (Office Building like Zonal Hqrs, Divisional Hqrs etc)
4.       Expected to be used during more than one reporting / financial year.

·         Fiduciary control  - Leased Assets in IR i.e., Rolling Stock from IRFC are also brought under FAR (though IRFC is the legal owner)

·         Not covered under FAR  - Insignificant items like Library Books, Computer peripherals, small items of equipments. However major spare parts and standbys equipment used more than one year are comes under FAR.

·         FAR  - The following information includes about Fixed Assets

1.       Description (in detail)
2.       Stockholder code (i.e., SSE, Sr.DEN, TXR etc)
3.       Block Section  (Between two Railway stations to trace the location in open line)
4.       Cost of Acquisition / Construction ( Acquisition Cost = Purchase Price + Import duties + Taxes + Incidental expenses – Trade discounts)  -“Where an Asset does not have a determinable cost, a nominal value of Re One may be taken for financial statement purpose” .  But this is the last alternative.
5.       Improvements should add to the cost  (But not POH or repair charges)
6.       Date of Acquisition (for Civil works – Completion of Construction.  For others – Purchase date)
7.       Mode of Acquisition  ( Construction, Purchase, Transfer, Gift etc)
8.       Reference of Title Documents
9.       Codal Life  (as per codes)  - useful for calculation of Depreciation
10.   Allocation Code – (Source of Allocation i.e., CAP., DRF, DF etc and Allocation i.e., Plan Head, Sub Head etc)
11.   Depreciation Rate   (Cost minus salvage value /codal life)
12.   Accumulated Depreciation  - From the date of acquisition to preparation of FAR
13.   WDV – Written Down Value / Net Book Value  ( Total cost minus Accumulated depreciation)
14.   Remarks  - Any other significant remarks (example encroaching of land )

FAR – Different formats for different category of Assets
FA 1 – Land

FA 2 – Buildings

FA 3 – Bridges, Tunnels, ROB





FA 4 – Roads and streets

FA 5 – Track /P Way
(Source: TMS – Track Management System
 Separately for Rails, Sleepers & Ballast)

FA 6 – Furniture
 (source: T & P register)





FA 7 – Office equipments
(Source: T & P Register)

FA 8 – Commercial Vehicles

FA 9 – Plant & Machinery and Equipment (Except for S&T Dept)





FA 10 – Computers & Peripherals
(Source: T&P register)

FA 11 – Medical equipments

FA 12 – Rolling Stock
(compiled by ICAI-ARF  central team duly taking the records from Zonal Rlys)





FA 13- CWIP – Capital Works In Progress
(at present no concept in IR)

FA 14 – Plant, Machinery & Equipment of Signal Dept

FA 15 – Plant, Machinery & Equipment of Telecom Dept





FA 16 – Electrical equipment & fittings of Commercial Dept

FA 17 – Intangible Assets (Copy rights, patents, Goodwill, Software etc)

FA 18 – OHE (Over Head Equipment)

·         T & P Register for source of FA 6 (Furniture), FA 7 (Office equipments) & FA 10 (Computer peripherals)
·         FA 13 – CWIP - Capital Works In Progress is new concept for Indian Railways
·         FA 12 – Rolling Stock - ICAI ARF (Institute of Chartered Accountants of India – Accounting Research Foundation) Central team collects the details from Zonal Hqrs records – Most of the Rolling stock is leased from IRFC
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Monday, June 17, 2019

Differences between Cash Accounting and Accrual Accounting


Book Keeping  - 5 marks question asked in 1988 & 2015
Differences between
Item
Cash Accounting
Accrual Accounting
1. Basis
Cash is the basis for recognition of Income or expense. That means actual cash received or paid is the basis.
Revenue earned for income and expense incurred is the basis.  That means Cash received or paid is immaterial
2. Nature
Simple
Complex
3. Matching concept
No.
 Example : Advance Rs. one Lakh received in 2018 December, for which service is not delivered in FY 2018-19.  But Rs. One lakh is accounted in Fy 2018-19 as income only, though service is not rendered.  That means Income received, but corresponding expense is not incurred in that particular year. Hence No matching concept.
Yes.  Advance Rs. one Lakh received in 2018 December, for which service is not delivered in FY 2018-19.  Here Rs. One lakh is accounted in Fy 2018-19 as Creditor/Advance income only .  If service delivers in FY 2019-20, advance income shown in 2018-19 FY is adjusted as income earned in the year FY 2019-20.  Because service delivered and income earned are matched in FY 2019-20.
4. Recognition of Revenue
Cash is received
Revenue is earned
5. Recognition of Expense
Cash is paid
Expense is incurred
6. Accuracy
Low
High
7. Suitable for
Not for profit / Govt / Charitable organisations
Business/ Commercial organisations
8. Recognised by Govt
Not by Companies Act, 2013
By Companies Act, 2013
9. Focus on
Liquidity
Profit and Loss
10. Treatment of Prepaid expenses
Charged to current year profits
Recorded as Assets in Balance Sheet
11. Treatment of outstanding expenses
Not recorded
Recorded in Debit side of  Profit and Loss Account and Liabilities side of Balance Sheet
12. Recording of Credit Purchases and Credit Sales
No
Yes
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Monday, May 20, 2019

Differences between Cash accounting and Accrual Accounting


Differences between
Item
Cash Accounting
Accrual Accounting
1. Basis
Cash is the basis for recognition of Income or expense. That means actual cash received or paid is the basis.
Revenue earned for income and expense incurred is the basis.  That means Cash received or paid is immaterial
2. Nature
Simple
Complex
3. Matching concept
No.
 Example : Advance Rs. one Lakh received in 2018 December, for which service is not delivered in FY 2018-19.  But Rs. One lakh is accounted in Fy 2018-19 as income only, though service is not rendered.  That means Income received, but corresponding expense is not incurred in that particular year. Hence No matching concept.
Yes.  Advance Rs. one Lakh received in 2018 December, for which service is not delivered in FY 2018-19.  Here Rs. One lakh is accounted in Fy 2018-19 as Creditor/Advance income only .  If service delivers in FY 2019-20, advance income shown in 2018-19 FY is adjusted as income earned in the year FY 2019-20.  Because service delivered and income earned are matched in FY 2019-20.
4. Recognition of Revenue
Cash is received
Revenue is earned
5. Recognition of Expense
Cash is paid
Expense is incurred
6. Accuracy
Low
High

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