Railway Accounts Department Examinations

Wednesday, April 1, 2020

ROCE - Management Accounting for LDCE

ROCE     -     Management Accounting for LDCE

·         Full form is Return On Capital Employed

 

·         It is most important Ratio among all the Financial Ratios

 

·         ROCE = Return /Capital Employed  x 100

 

·         Expressed in Percentage.  Example  Return is 200 rupees against the capital 2000 rupees employed. ROCE is 200/2000 x 100 = 10 %. 

 

·         Return = Net Profit + or - Non Trading adjustments + Interest on Long term debts + Provision for tax - Interest/Dividend from non trade investments

 

·         Capital Employed = Equity share capital + Reserves & Surpluses + Preference share capital + Debentures & other long term loan - Misc Expenditure & loss - Non trade investments.

 

ROCE in Indian Railways

 

·         Para 511 of Indian Railway Finance & Administrate Code mentions Return on Capital.

 

·         Return on Capital = Percentage of Revenue Surplus/Net Receipts to Capital at charge and Investments from Capital Fund.

 

·         Revenue Surplus/Net Receipts = Total Revenue Receipts - Total Revenue Expenditure

 

·         Since element of Dividends is not there (from 2017-18 onwards due to merger of Railway Budget with General Budget), the Net Receipts and the Revenue Surplus are one and same.

 

·         Total Revenue Receipts = Gross Earnings (X, Y & Z) minus  Suspense

 

·         Total Revenue Expenditure = Gross Working Expenses ( OWE + Appropriation to DRF & Pension Fund) minus Suspense.

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Saturday, March 28, 2020

Indian Railways Vs Government of India


Indian Railway Accounts:  What is common with the Govt of India Accounts

1.       Classification of Government Accounts i.e., Consolidated Fund of India, Contingency Fund of India and Public Account of India.
2.       Voted and Charged Expenditure
3.       Audit authority of Financial transactions - CAG - Comptroller & Auditor General of India
4.       Funds voted by Parliament
5.       Appropriation Accounts presented to Parliament
6.       Budget
7.        Account Current
8.       Exchequer Control
9.       Ways & Means
10.   GFR - General Financial Rules
11.    Demands for Grants
12.   Major Heads & Minor Heads (Classification of Expenditure and Earnings)

Indian Railways: what is unique in comparing other Depts in Govt of India

1.       Maintenance of Accounts by Dept itself ( in Other Depts - by CAG)
2.       Operation of Minus Debit and Minus Credit
3.       Keeping the accounts of the railways on a commercial basis outside the regular government account.  Thus maintaining Two sets of Accounts.
4.       Link Heads ( i.e., Demands Payable, Traffic, Labour & Demands Recoverable)  connecting Commercial Accounts with Government Accounts.
5.       Preparation of Profit & Loss Account and Balance Sheet
6.       Separate Codes and Manuals
&&&

Tuesday, March 24, 2020

Marginal Costing for LDCE


Marginal Costing

·         Total cost + Profit  = Sales   
  
·         Total Cost = Variable Cost   +  Fixed Cost  

·         So, Variable Cost + Fixed Cost + Profit  = Sales

·         Sales = Variable Cost + (Fixed Cost + Profit)

·         Contribution = (Fixed Cost + Profit)

·         Sales - Variable Cost = Contribution

·         I.e., S - V = (F + P)
or
·         S - V = C
or
·         C = S - V

·         Contribution = Sales - Variable Cost

·         Contribution = (Fixed Cost + Profit)

·         (Fixed Cost + Profit) = Sales - Variable Cost

·         Profit Volume Ratio (PV Ratio) = Contribution / Sales

·         BEP - Break Even Point = Where No Profit or No loss.

·         BEP - Break Even Point = Fixed Cost / P V Ratio

Problem:

Sales - Rs. 100,  Variable Cost - Rs. 80,  Fixed cost - Rs. 10.   Find the Sales at Break Even Point

Answer:

Contribution = Sales - Variable Cost

C = Rs. 100 - Rs. 80 = Rs. 20

PV Ratio = Contribution / Sales = Rs. 20/ Rs.100  = 0.20

BEP = Fixed Cost / PV Ratio

BEP Sales = Rs.10 /0.20  = Rs. 50

To Prove:

If Sales is Rs. 100,  Variable Cost is Rs. 80

If Sales is Rs. 50, Variable Cost is ?   = 50/100 x 80  = Rs. 40

Contribution = Sales - Variable Cost   Rs. 50 - Rs. 40 = Rs. 10


In Break Even Point, Contribution equals Fixed Cost.  Here too Contribution (Rs. 10) and Fixed Cost (Rs.10) are equal. That means No Profit or No loss at Sales Rs. 50.

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Flow chart of IRFC - Indian Railway Finance Corporation

Sunday, February 9, 2020

NIF - National Investments Fund


NIF - National Investments Fund

·         One of the sources of finance for Indian Railways Capex - Capital Expenditure

·         Established in 2005

·         Maintained by : DIPAM - Dept of Investments & Public Asset Management

·          Credits: Proceeds from disinvestment of CPSEs - Central Public Sector Enterprises.  Initially the proceeds are kept under Public Account of India.

·          Corpus(Amount) of NIF - Permanent nature.  That means  the money with the NIF is permanent in nature and is professionally managed to provide returns (income) to the Government without depleting its value (corpus) 

·         Managed by : Professional Managers such as SBI Funds Managment pvt ltd, UTI Asset Management Company ltd, LIC Mutual Fund Asset Management Company ltd.

·         NIF income- utilised for the following purposes.

1.       Subscribing - shares being issued by the CPSE on Rights basis or Preferential allotment of shares as per SEBI regulations  ( to ensure 51% ownership by the Govt)
2.       For capital infusion in Public Sector Banks & Public Sector Insurance companies to meet BASEL III norms.
3.       Investments in Regional Rural Banks/NABARD- National Bank for Agriculture & Rural Development/EXIM Bank - Export - Import Bank/IIFCL - India Infrastructure Finance Company Limited.
4.       Equity infusion in Metro Projects
5.       Investment in Bhartiya Nabhikiya Vidyut Nigam Limited (BNVNL) & Uranium Corporation of India Limited.
6.       Investment in Indian Railways towards Capital Expenditure.
&&&&

CRIF - Central Road & Infrastructure Fund


CRIF - Central Road & Infrastructure Fund

·         One of the Sources of Finance under Capital Expenditure (Capex) of Indian Railways

·         Rs. 18,500 Crores - allocated to Capex of Indian Railways in 2020-21 Budget (Rs. 15,250 Crores in 2019-20) - Usually spend on LC Gates and ROB/RUBs under Plan Heads 2900 & 3000 through RSF - Railway Safety Fund.  CRIF is the main source for RSF.

·         Established in 2000   (The Central Road and Infrastructure Act, 2000) F

·         Old name is CRF - Central Road Fund

·         Managed by Dept of Economic Affairs (DEA) under Ministry of Finance. (Previously it is under Ministry of Road Transport & Highways)

·         Source of Fund -  Levy & collect by way of Cess, a duty of excise and duty of customs on Petrol and Diesel  (in 2018-19 - Rs. 1,13,000 Crores collected).  It is approximately Rs. 10 per liter of Diesel / Petrol.

·         Object: To finance infrastructure projects such as Railways, Inland Waterways, Roads & Bridges, Ports, Shipyards, Urban Public Transport, Energy, Water & Sanitation, Communication & Social infrastructure (educational institutions)
   
·         Ministerial panel on CRIF - 4 Ministers (of Finance, Railways, Road transport & Highways, HRD) - for allocation of funds under CRIF

·         The 15-member sub-committee has Secretaries from different Ministries - Examine and evaluate proposals received from Ministries on infrastructure projects.
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2020-21 Railway Budget financials


 2020-21 Railway Revenue Budget - Financials

click for Statement of Railway receipts and Expenditure Budget 2020-21


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