Differences between Lease & License

Differences between Lease and License

1991 with Books - 10 marks.

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Lease:   

1. It is an agreement between the Lessee (user) and the Lessor (owner) for use of an asset in return for specified rental/lease payments.

2. As per Section 105 of The transfer of Property Act, 1882   -  " A transfer of right to enjoy the concerned property for a pre-defined time period or in perpetuity subject to the consideration given by Lessee (user of the property)  to the Lessor (owner of the property).
License:

1. A promise by the Licensor not to sue the Licensee.  That means without a License, any use or exploitation of intellectual property by a third party would amount to copying or infringement.

2. As defined in section 52 of the Indian Easements Act, 1882  -  " License does not allow any interest in the Property on the Licensee's part.  It merely gives the Licensee the right to use and occupy the Property for a limited duration."

Basically looks both terms are one and alike.  But for entitlement/possession and title of property, many a difference between Lease and Licensee.  Those who ( Property owners) avoid risk will prefer License mode.  But they have to lose higher remuneration/compensation compare to Lease mode.

Lease	License
1.Parties: Lessor (owner) and Lessee (user)	1.Parties: Licensor (who accorded permission) and Licensee (to whom permission is accorded)
2. Exclusive possession of property to Lessee for a period of time.	2. No such exclusive possession of property to Licensee.
3. It is irrevocable.  Means cannot be cancelled before the completion of Agreement unless otherwise specified.	3. It is revocable/cancel before the completion of Agreement at the choice of Licensor.
4. Consideration is called Lease rental	4. consideration is called Fees.
5. It is transferable.  That means Lessee can transfer the lease to third party.	5.  It is not transferable.
6. Transfer of interest in the property to the Lessee.	6. Here the legal possession continues to be with the Licensor, not Licensee.  But Licensee is permitted to make use of the property for a particular purpose.  So it does not create any interest in the property to Licensee.
7. Can be terminated as per the terms of Agreement only.  ( But not at the will of parties).	7.  Can be withdrawn /terminated at any time by the Licensor.  For this reason organizations such as Indian Railways prefer License option rather than Lease option, while permit using of its assets by third parties.
8. It does not come to an end either by death of Lessor or the Lessee.	8. But here it come to an end either by Licensor or Licensee.
9. Lessee entitled to any improvement made to the property.	9.  No such entitlement to  Licensee for any improvement to the property.

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Differences between Demands Recoverable and Bills Recoverable

DIFFERENCES BETWEEN

Demands Recoverable (D.R)	Bills Recoverable (B.R)
1.       Introduced from 01.04.1988.	1. Existed since the beginning of Railway Accounts
2.       Purpose: to bring to account all dues pertaining to Rent/lease of Railway Land and Buildings and Interest and Maintenance Charges of Sidings.	2. Purpose: to bring into account all dues pertaining to Water, Electricity, Staff charges & AMC of LC gates
3.       When the amounts due for Railway has been raised in the form of Bills – Debited to Demands Recoverable and Credited to Abstract Z earnings.	3.When the amounts due for Railway has been passed for payment  - Debited to Concerned Revenue Demands and Credited to Cash A/c ( Cheques& Bills)
4.       On the receipt of remittance from the parties – Debited Cash A/c (RIB) and Credited to Demands Recoverable.	4. On receipt the remittance from the parties -Debited Cash A/c(RIB) and Minus Debited to concerned Revenue Demands. (exception : water charges. These will be credited to earnings)
5.       Closing Balance of D.R.: Represents unrealized amount in the form of outstanding “Demands Recoverable”.	5. No question of closing balance as there is no separate Bills Recoverable A/c
6.       Examples: A.Land rent charges for engineering and commercial plots. B. Interest, maintenance charges & Inspection charges for sidings. C. Rent of Buildings & D. Maintenance charges for ROBs, FOBs and level crossings.	6. Examples: A. Cost of commercial staff/other staff (engineering) deputed to sidings. & B. Maintenance/Wagon repair charges. C.Water bills D. Electricity bills
7.       These are form a part of Sundry earnings (Abstract Z	7.These are not part of Sundry earnings (Abstract Z).  Recovery from parties reduces the expenditure in Revenue Demands which are already accounted in Books. (exception : water charges. These will be credited to earnings)
8.       Clearance under the “Demands Recoverable” leads to reduction in Traffic Suspense.  Thus resulting in Better operating Efficiency.	8. Clearance under the “Bills Recoverable” leads to the reduction in Revenue Demands. Thus results in improving Operating Ratio.
9.       It is one of the “LINK HEADS” connecting Government Accounts with Commercial Accounts.	9. It is not a Link Head.

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Differences between Reserve Bank Suspense & Reserve Bank Deposit

DIFFERENCES BETWEEN

RESERVE BANK SUSPENSE AND RESERVE BANK DEPOSIT

Most important question asked several times in appendix 3A examination (in 1986, 1988, 1990 & 1997 (without Books) and asked as Short Notes question.

The below given material is useful for question of Differences between as well as Short notes.

Reserve Bank Suspense (RBS) :

Ø  It is a suspense head operated for settling INWARD transactions from other Accounts Officers      ( Except for Cheques & Bills and Remittance into Bank)

Ø  As and when, the ADVICES received, the RBS A/c is debited ( in case of receipts) or credited (  in case of expenditure).

Ø  on receiving "CLEARANCE MEMO" from RBI-Reserve Bank of India, the a/c in RBS is cleared by contra Debit or credit to Reserve Bank Deposit (RBD).

Ø  All balances under RBS should be NIL at the end of financial year i.e., 31st March.  If any balance is left over, the same should be transferred to MAR (if debit balance) or to Deposit Misc (if credit balance) as the case may be.

Journal entries:

example: Receiving Debit from other Accounts Officer.

1) On receipt of ADVICE ( Debit ) from the other Accounts Officer 

                                Concerned Revenue Demand        Dr.               xxxx

                                                To Reserve Bank Suspense (RBS)    Cr              xxxx

( Booking of expenditure to respective Demand and simultaneously placed under RBS for clearing due from RBI)

2) On receipt of CLEARANCE MEMO from RBI-Reserve Bank of India

                                Reserve Bank Suspense (RBS)      Dr                         xxxx

                                                To Reserve Bank Deposit (RBD)    Cr                  xxxx

(Clearing balance in RBS duly debited and credited to Railway Central Fund i.e., RBD- Reserve Bank Deposit)

RESERVE BANK DEPOSIT (RBD)

v  The original name is "Deposit with Reserve Bank" Major Head 8675.

v  It is a Railway Central Fund in the Books of Reserve Bank of India - CAS- Central Accounts Section at Nagpur.

v  It is operated to record, the "Clearance Memo" which are received from RBI in clearance of transactions intimated either by :-

a)      FA&CAO's for the transactions originating in Railway Books and are to be settled through RBI.

b)      In clearance of transactions which are intimated by other Accounts Officers to the RBI.

c)       The clearances of RIB-Remittances Into Bank  and C&B- Cheques & Bills( through PSB suspense - Public Sector Bank Suspense)

v  The Balance under RBD is closed to "GOVERNMENT" at the end of the year i.e., 31st March.

v  RBD is reconciled with the General Books.

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DIFFERENCES BETWEEN

RESERVE BANK SUSPENSE - RBS	RESERVE BANK DEPOSIT - RBD
1. Operated only for INWARD transactions	1. Operated for both INWARD & OUTWARD transactions
2. Operated for settling Inward transactions from other Accounts Office i.e., Defence, P&T etc	2. Operated for adjustment of transactions i.e., clearance of C&B, RIB and transactions settled with Non-Rly depts as well as outward transactions raised by FA&CAOs against other depts.
3. Nature of the Head is "SUSPENSE" in the books of Railways	3. Nature of the Head is FINAL i.e., "Railway Central Fund" in the books of RBI/CAS/Nagpur.
4. Until the transaction adjusted, this Head is bear the transaction.  Once the transaction is adjusted to RBD, the balance under this Head is cleared.	4. With the operation of this Head, the adjustment of transaction is over, thereby effecting the balance of Railway Deposit in RBI/CAS/Nagpur.
5. Clearance: All the items under this head should be cleared at the end of the year.  If any balance is left over, the same is transferred to MAR (debit balance) or Deposit Misc (Credit balance) as the case may be.	5. Clearance: The balance under this Head should  be transferred to GOVERNMENT at the end of the year i.e., March, 31st.

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Differences between MAR & Deposit Miscellaneous

5 marks question -1986 (WO) & 1993 (WO)

DIFFERENCES BETWEEN

MAR	DEPOSIT MISCELLANEOUS
1.It is a Suspense Head under the Major Head 3002   - Indian Railways Commercial Lines.	1. It is a Suspense Head under the Major Head 8445 - Indian Railways Deposits.
2. It records all DEBITS of transactions which cannot be booked directly to the final heads of accounts for want of allocation, inter-dept. transactions awaiting acceptance, Debit balance in Reserve Bank Suspense (RBS), etc at the end of the year.	2. It records all CREDITS like miscellaneous deposits made to Railways like Security Deposit, EMD, Court attachment recoveries, Deposit Works amount paid by concerned persons etc.
3. It always shown as Debit Balance.	3. It always shown as Credit Balance
4. The Balance under this Head should be examined to see "That there are no Credit Items"	4. The Balance under this Head should be examined to see "That there are no Debit items"
5. Direct Credit cannot be booked to this Head, unless there is corresponding Debit already there.	5. Direct Debit cannot be booked to this Head, unless there is a corresponding Credit already there.

Differences between Gross Receipts and Gross Earnings

1989 (wo), 1990 (wo) & 1995 (w) - 5 marks

DIFFERENCES BETWEEN

S.N.	Gross Receipts	Gross Earnings
1	Actual is the basis	Accrual is the basis.
2	Actually realized during the accounting period i.e., financial year. (irrespective of pertaining to previous year or next year)	Accrued during the accounting period i.e., financial year ( irrespective of whether actually realized or not)
3	Represents Gross earnings plus Traffic Suspense.	Represents Coaching Earnings plus Goods Earnings plus Sundry Earnings ( less refunds)
4	Conforms Government accounts	Conforms Commercial Accounts

Differences between Write back and Write off

5 marks question in General Expenditure -1995 (WO),1997(WO) & 2001 (WO)

DIFFERENCES BETWEEN

Write back	Write off
1. Resorted for regularisation of the incorrect allocation to any Head or write back of provision in original Head.	1. Used when the Railway administration relinquishes its right of claim for one reason or other for an amount (after the same is incorporated into regular accounts)
2.The correct account head is debited and minus debit to that from which the charges are written back. Example: When the over aged coach (source of procurement is capital) is condemned, the original value of such asset i write back from the Capital as follows. CAPITAL - 2100  - Minus Debit  --   xxxxx        DRF - 2100  -  Debit              --   xxxxx	2. It mainly relates to bad debits such as irrecoverable amount of advance paid, loss of cash or stores due to theft, fraud or natural calamities, in efficient suspense balances, capital assets by amortisation etc.
3. It means to take reverse the original transaction i.e., write back for sufficient reason.	3. It means, a Debit balance in the books, but not possible to realise the same in future.   So Write off the same.

for article on Write Back adjustments

Click

Differences between Capital & Capital Fund

DIFFERENCES BETWEEN

CAPITAL	CAPITAL FUND
1. External source (given by Ministry of Finance)	1. Internal source ( Surplus available after paying Dividends and appropriating to DF, RSF )
2. Dividend to be paid on Capital provided by Ministry of Finance.	2. Dividend need not be paid, since it is a surplus after meeting all obligations of Railways.  On the other hand, Interest is credited to the Capital Fund on the balance of the Fund at the end of financial year.  (Rate of interest is equal to the Dividend rate and recommended by RCC from time to time)
3. Rules of allocation is prescribed in chapter V of Finance Code volume I.  They are a) cost of first construction b) Land c) Cost of construction of quarters.	3. No separate rules existing for utilizing this Fund usually charged to all Plan Heads (except Plan Heads 11 & 51).  However in current years, the Capital Fund is utilized for meeting the Plan Head 2200 - Principal component of lease charges payable to IRFC

Differences between IRCA & IRFA

Differences between IRCA & IRFA transactions

IRCA transactions	IRFA transactions
1. Expand : Indian Railway Conference Association.	1. Expand: Indian Railway Financial Adjustments.
2. Chargeable to : Demand No.09G-740-33	2. Chargeable to Demand No.09G-750-33
3. IRCA is authority for carrying out adjustments among all Zonal Railways.  Debits are raised by Northern Railway on other Zonal Railways based on the advice of IRCA.	3. Zonal Railways are responsible for raising charges on other Railways.
4. Pertaining to Goods Wagons only ( for Pakistan & Bangladesh Rly – All Rolling Stock)	4. Pertaining to Locos (Dsl & Electrical) & Coaches.
5.   A.Charges / Receipts relating to inter charged Stock (Goods wagons only) of Indian Railways-(i) Repairs, (ii) maintenance (iii) Depreciation                     B. Charges relating to Inter-change of all Rolling Stock with Foreign Railways(e.g. Pakistan and Bangla Desh Railways)	5..Will record the receipt / charges on account of adjustments carried out amongst Indian Govt. Railways on account of (i) Repairs, (ii) Maintenance and (iii) Depreciation in respect of rolling stock (other than goods wagons i.e., Locos & Coaches) of one Railway in use on other Railways.
6.Basis for calculation: Wagon balance is the net difference between the ownership and the actual holding of wagons of Zonal Railway.  On a particular day, if a particular Rly holds less number of wagons that it owns on a particular day, it is entitles to hire charges for balance of the Wagons.  Conversely the Rly holding more wagons that its own is liable to pay hire charges for the excess number of Wagons it holds.	6. Basis for calculation: (A) Locos : Debits will be passed on by the owning Railway to the using Railway at the unit cost based on the total engine hour on outage basis (i.e. from the time it leaves from the shed & till it returns to the shed) earned by the engines on the using Railway. (B) Coaches: The credit/debit adjustments should be worked out on the basis of kilometres earned by through rakes/passenger coaches running on more than one railway system. Vehicle kilometres in respect of through coaches should be worked out on the basis of the working time table periods and the rake links.

Note: Codal provisions in respect of IRCA & IRFA -Para 869 of Finance Code vol. One - Click for  Chapter 8th of Finance Code Volume One

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Differences between SD and PG

DIFFERENCES BETWEEN

Security Deposit (SD)	Performance Guarantee (PG)
1.       In token for the due fulfilment of the contract	1. In token for the purpose of successful performance by the Contractor to execute the work. Introduced in lieu of risk action procedure (contracts rescinded due to failure of contractors)
2.       EMD of successful tenderer will be retained as part S.D., balance will be recovered at the rate of 10% of the bill amount till the full Security Deposit is  recovered,	2.  Obtained from successful bidder after issuance of LOA, but within 60 days of issue of LOA. a)      Within30 days from LOA – No interest b)      31 to 60 days from LOA – penal Interest 15 % per annum
3.       Balance Security Deposit will be recovered only from the running bills of the  contract and no other mode of collecting SD shall be permitted	3.  Submit the Performance Guarantee in any of the forms i.e., Cash, Irrevocable Bank Guarantee, Govt securities, DDs of nationalized banks, Post office SB deposit, NSCs etc.
4.       There is no question of failing to submit the balance SD, because the same is recovered from running bills at the rate of 10% of bill amount till the full SD is recovered.	4.  In case the contractor fails to submit the requisite PG even after 60 days from the date of issue  of LOA, the contract shall be terminated duly forfeiting EMD and other dues, if any payable against that contract. The failed contractor shall be debarred from participating in re-tender for that work.
5.       Can be released subject to A)     Physical completion of the work and Maintenance period if any. B)      After passing Final Bill C)      Obtaining the No Claim certificate from the Contractor D)     Obtaining the No Dues certificate against   Contractor from the Executive	5.  Can be released immediately after physical completion of the work.

                Click here for article on PG

                              Performance Guarantee                          

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Differences between Sales suspense & Traffic Suspense

2016  year Books & Budget (with books)

DIFFERENCES BETWEEN

Sales Suspense	Traffic Suspense
1.    It is a Capital Suspense Head.	1.    It is a Revenue Suspense Head.
2.    It is operated under Capital Expenditure( Plan Head 7100)	2.    It is operated on Revenue Receipts
3.    Shown as Debit balance (as Minus Debit in practical)	3.    It is always having Debit balance
4.    CREDIT -: When the sale proceeds is deposited /received.  DEBIT:  When sale issue note is accounted.	4.    Debit: Accrued earnings. Credit: The realization of the Accrued earnings:
5.    Object: Watching the realization of sale proceeds of Auction sales.	5.    Object: Watching the realization of accrued/outstanding earnings
6. It is not a Link Head	6. It is a LINK head connecting between           Government accounts and Commercial           Accounts