<p>Indian Audit and Accounts Department Structured Courseware on Government Accounting Session: 8 – Transfer Entries</p><p>Transfer Entries Account to which it is ultimately and (Chapter-7 of Account Code for correctly taken and reasons for proposing Accountant General) the transfer.</p><p>Session Overview At the close of the monthly accounts and at the close of annual accounts, certain adjustments are required to be carried out A very large number of transactions take in the Government Accounts to present a place on Government Account. The true and fair view of the Accounts. For number of individuals, offices, example, when the General Provident organizations, etc. (like drawing and Fund Account Ledgers are closed at the disbursing officers, individuals permitted end of the year, interest accrued on the to operate on Government Account balances and deposits of individual through a special authority, individuals accounts is worked out and credited to the and corporates remitting tax dues, individual General Provident Fund individuals and organizations remitting fee Accounts by raising a corresponding debit for services provided by Government, etc.) for the interest amount to the Consolidated originating the transactions is also very Fund under the Interest Head of Account. large. These innumerable transactions are These adjustments are also carried out in captured and recorded in initial accounts Government Accounts through by a larger number of organizations (like authorizations of competent authority treasuries, district treasuries, offices through the document known as ‘Transfer authorized to operate on Government Entry’. The Transfer Entry in such cases Account through cheque drawing powers, also essentially records the Head of other Accounts Offices, etc.). The sheer Account to which the adjusted amount is number of transactions and the sheer debited and the Head of Account to which number of organizations capturing the the amount is credited and reasons for transactions in initial accounts leads to the proposing the adjustment. possibility of misclassification of some (may be a very small number) transactions Transfer Entries and records connected under an incorrect head of account. These therewith are important records to keep a misclassifications, when detected, are track of various adjustments and to ensure required to be set right immediately and that transfers and adjustments are allowed the transactions recorded under the correct only on the authorizations of competent classification head of account so that the authority. Government Accounts present a true and fair view of the accounts of the During this session, we will discuss: Government. >What is a Transfer Entry? > Preparation of Transfer Entry. The rectification of misclassifications is > Object of Transfer Entry. carried out through authorizations of > Maintenance of Transfer Entry Book competent authority through a document known as ‘Transfer Entry’. The Transfer Entry essentially records the Head of Account from which the misclassified amount is withdrawn and the Head of </p><p>Participant Note No. 8 1 Courseware designed and prepared by: Regional Training Institute, Allahabad Indian Audit and Accounts Department Structured Courseware on Government Accounting Session: 8 – Transfer Entries</p><p>Learning objective Rs.500 credited to the receipt head “0210-Medical and Public Health”- At the end of the session, the learner will means that receipts under the be able to define Transfer Entry, its use above head have been increased by and accounting procedure. Rs.500.</p><p>Concept of Debit and Credit in (v) Dr. to a debt means repayment of Government Accounts debt unless it is clearly stated as “Deduct Receipts”. The terms debit and credit or ‘Dr’ and Rs.500 are debited to the debt head ‘Cr’ used in Government Accounts or “8005 State Provident Funds”, it used in the transfer entries have the means there is a repayment of debt following meaning: - by Rs.500. (i) Debit to an expenditure head means increase in the expenditure If Rs.500 are deduct-credited to the of that head of account. above head i.e. Rs.500 are Deduct If Rs.500 are debited to the head credit (D/d Cr.)-8005 State “2210-Medical and Public Health”, Provident Fund, it will indicate that it means expenditure under the receipts of debt have been above head has been increased by decreased by Rs.500. Rs.500. . (vi) Credit to a debt head means (ii) Credit to an increase in receipts of debt unless expenditure head means decrease it is clearly stated as “Deduct in expenditure. payments” Rs.500 credited to the head “2210- Rs.500 is credited to the head Medical and Public Health”, means “8005- State Provident Funds”. It that expenditure under the above means that receipts have been head has been decreased by increased by Rs.500. Rs.500. If Rs.500 are deduct debited viz. A. (iii) Debit to a receipt head means Rs.500 (Deduct payment)-8005- decrease in receipts. State Provident Funds to the above heads, it will imply decrease the Rs.500 debited to “0210-Medical payments by Rs.500 and Public Health”- means that receipts under the above receipt Expenditure booked in Government head have been decreased by Accounts under the Sections Rs.500. ‘Consolidated Fund’ and ‘Transfers to Contingency Fund’ has to be carefully (iv) Credit to a receipt head means monitored as the expenditure under these increase in receipts. sections can be incurred only with legislative approval through the </p><p>Participant Note No. 8 2 Courseware designed and prepared by: Regional Training Institute, Allahabad Indian Audit and Accounts Department Structured Courseware on Government Accounting Session: 8 – Transfer Entries</p><p>Appropriation Act. Any adjustment or activities should be accounted for correction in accounts has to be carefully separately from expenditure on the same examined to determine its effect on the activity. It is because of this that the expenditure and appropriations for the concept of ‘Minus Credit’ and ‘Minus year. Debit’ has evolved in Government Accounts. Concept of Minus Credit and Minus Debit in Government Accounts An item of receipt wrongly classified under a head of accounts is withdrawn Unlike commercial accounts, there is a from that head of account through concept of ‘Minus Debit’ or ‘Minus transfer entry by giving ‘Minus Credit’ Credit’ in Government Accounts. The to that head and crediting the concept has been incorporated to clearly misclassified transactions under the adjust the transactions under their proper correct head of account. Similarly an heads of account, either on receipt side item of disbursement wrongly debited to or on payment side. a head of account is withdrawn from that head of account by giving a ‘Minus In commercial accounts, ledgers are Debit’ to that head per contra debit to the maintained for each set of transactions correct head of account. under a particular head of classification and all receipts and all payments Corrections and Adjustments adjustable under that particular head are captured under that unit of classification Corrections and adjustments within in the ledger. Net effect of transactions departmental accounts are effected by (either credit or debit) is eventually means of transfer entry. If an items in a taken to the trail balance and then to the transfer entry has to be taken to a head in annual financial statement (profit and another Departmental Account in the loss account/income and expenditure accounts of the same Government it account or balance sheet). should be classified in the transfer entry as pertaining to the Suspense head In Government Accounts separate heads “Departmental Adjusting Account” of account are prescribed for receipts relating to the other department. The and for payments, even though they transfer entry with the necessary both, i.e. receipts and payments, relate to suspense slip should then be sent, for the same set of transactions. Thus, we acceptance and return, to the section have a head of accounts for accounting which maintains the Detail Book or receipts from petroleum like cess, Departmental Abstract in which the concession fee and royalties, etc. On the transferred item will be finally adjusted other hand we have a head of account for under the proper head. When received accounting of expenditure on petroleum back with the acceptance, the transfer like on exploration and production of entry will be posted in the Combined crude and gas or on refining and Transfer Ledger and Abstract. marketing. Besides, legislative control on expenditure out of Consolidated Fund The Section to which a transfer entry is requires that receipts from government sent with a suspense slip for acceptance </p><p>Participant Note No. 8 3 Courseware designed and prepared by: Regional Training Institute, Allahabad Indian Audit and Accounts Department Structured Courseware on Government Accounting Session: 8 – Transfer Entries should retain the suspense slip and deal Departmental Suspense head, as may be with it in the same way as if it had been considered necessary or suitable. Except received with the departmental schedules as provided otherwise this transfer entry of a treasury. should invariably be included in the Central Accounts of the same month. This If an item of receipt or payment relating to procedure applies mutatis mutandis when the Central Government (other than central an item of State pension receipt/ payment pensions) is wrongly included in the is wrongly included in the schedule of schedule of State receipts or payments, the Central receipts/ payments. amount should be credited or debited as the case may be, to the Suspense head The recoveries of overpayments whether “8658 Suspense Accounts PAO Suspense- made in cash or from payment vouchers items adjustable by Ministry/Department shall be posted direct under the service in the State Classified Abstract”. At the head concerned in the Compilation Book same time, the relevant particulars of as reduction of expenditure irrespective of receipts/payments should be passed on to whether they relate to overpayment the section dealing with inter-Government pertaining to the current year or to any Settlement Accounts in the office (which previous year. is generally called Account Current Section) for eventual cash settlement with Object of Transfer Entries the concerned Pay and Accounts office of the Ministry/Department. This procedure Transfer entries, which are entries applies mutatis mutandis when an item of intended to transfer an item from one State receipt/payment is wrongly included head of account to another, are in the schedule of Central receipts or necessary: - payments (except the Central Pensions). (a) In order to correct an error of classification in the original In respect of items of receipt/ payment accounts; relating to Central Pensions wrongly (b) In order to adjust, by debit or included in the State schedule of credit to its proper head, an item receipts/payments the amount should be outstanding under a Debt, credited or debited as the case may be, to Deposit or Remittance Head; the head “8786 Adjusting Account (c) In order to adjust inter- between Central and State Governments” departmental and other in the State Departmental Classified transactions which do not Abstracts of pensions. At the same time, involve the receipt or payment of the Departmental Accountant concerned cash. will prepare a transfer entry for incorporation in the Central Section of Another type of case in which transfer Accounts in which debit or credit for the entries are necessary occurs when it is amount in question, should be given to the found more convenient to classify items head “Adjusting Account between Central pertaining to more than one head of and State Governments” by corresponding account under a single head of account credit or debit either to the appropriate in the first instance than to classify them trial head of account or to the relevant under each head of account from the </p><p>Participant Note No. 8 4 Courseware designed and prepared by: Regional Training Institute, Allahabad Indian Audit and Accounts Department Structured Courseware on Government Accounting Session: 8 – Transfer Entries beginning; for example when a definite annual and half yearly transfers should proportion of any receipt or charge is be avoided. taken to a separate head, it is often convenient to make the distribution upon Correction of Accounts the totals of the Departmental Abstract or the Detail Book. (a) If an item which properly belongs to a Revenue or Expenditure head Preparation of Transfer Entry is wrongly classified under another Revenue or Expenditure head in Transfer entry should be prepared in the accounts of the same Form AC 23. On one side of every Government, the error may be transfer entry there should be only one corrected at any time before the major head to which there may be a accounts of the year are closed, but debit by credit to sundry heads or vice after the accounts are closed, no versa; debit should not be taken against correction is admissible, it being sundry head by credit to sundry heads. A sufficient to make a suitable note fortiori, the same entry should not of the error against the original contain independent corrections of two entry. If, however, the error affects major heads; it may not debit A by credit the receipts and disbursements of to B, and again C by credit to D. another Government, or the transactions of a Commercial In a transfer entry all particulars Department it should be corrected explaining both the nature of the by transfer in all cases as soon as adjustment and (if it is a correcting the error is discovered. transfer) the grounds of the correction must be clearly stated. (b) An error, which affects a Debt, Deposit or Remittance head, must A list of adjustments which have to be be corrected by transfer, however made periodically should be maintained old and however small it may be. If in order to ensure that they are regularly the accounts of the year in which made. These adjustments should, as a the error took place are not closed, rule, be made monthly. If this is found the correction should be made by inconvenient and if the Accountant the removal of the item from the General considers that there are head under which it was wrongly sufficient grounds for postponing any taken to that to which it properly adjustments, they may be made belongs. If the accounts of the year quarterly. Unforeseen adjustments in which the error took place are should, however, be made as soon as the closed, then the following necessity for them arise. procedure should be followed in the case referred to: Save as may be authorised by the Comptroller and Auditor General or by 1- an item taken to one Debt, Government in consultation with the Deposit and Remittance Head Comptroller and Auditor General, instead of another- the correction should be made by</p><p>Participant Note No. 8 5 Courseware designed and prepared by: Regional Training Institute, Allahabad Indian Audit and Accounts Department Structured Courseware on Government Accounting Session: 8 – Transfer Entries</p><p> transfer from the one to the other; 2- an item credited to a Debt, Procedure of making a transfer Deposit and Remittance Head entry instead of to a revenue head, or debited to a Debt, Deposit A correction by a transfer entry may be and Remittance Head instead proposed by any section of an Accounts of to an expenditure head, the Office. It should be accepted by the correction should be made by other section concerned if the entry has transfer to the head under been drawn up according to rule and which it should originally necessary particulars are furnished, have appeared; original vouchers and other documents 3- an item credited to a revenue in support of the entry should be head instead of to a Debt, recorded in the section which originally Deposit or Remittance head, dealt with them and not sent to the other correction should be made by section concerned along with the transfer debiting the proper head and entry. crediting the relevant receipt . head. Maintenance of Transfer Entry Book 4- an item debited to an expenditure head instead of a A Transfer Entry number book in form Debt, Deposit or Remittance AC 24 should be maintained in each head, correction should be accounting section in which should be made by debiting the proper entered in brief but clear detail the head and crediting the particulars of each transfer entry relevant receipt head. originating in that section, it being sufficient to fill in columns 1 and 2 only After the accounts of the year are closed, in respect of transfer entries received corrections or transfers affecting capital from other sections. The Transfer Entry major heads, unless they affect the Number Book for Central transactions account of different Governments, should be kept separate from that for should usually be effected without State transactions. The entries proposed financial adjustment by alteration of by the several sections should be progressive figures, without passing the numbered serially by each, a distinctive debit and credit entries through the letter being used by each section and accounts of the year’s financial these numbers entered in their respective transactions, when the error is detected. Number Books. The number to be given This would prevent unnecessary to an entry received from another section inflation of the current year’s accounts should be expressed as a fraction, the and the voting of grants of doubtful numerator of which will denote the propriety which the inclusion of the number as given by the originating correcting entries in the current accounts section and the denominator will show would otherwise involve. the number assigned to the entry in the Number Book of the receiving sections.</p><p>Participant Note No. 8 6 Courseware designed and prepared by: Regional Training Institute, Allahabad Indian Audit and Accounts Department Structured Courseware on Government Accounting Session: 8 – Transfer Entries</p><p>The provision may be relaxed, at the have corresponding accounts on both discretion of the Head of the Accounts sides. Office, when, in view of the large number of transfer entries received from When large transfers are made from one other sections, it is considered more Debt, Deposit and Remittance Head to economical only with reference to the another in order to correct the original entries so received and not those classification in account the transaction originating in the receiving section itself, should, wherever possible be made by a to maintain a simple Index of Transfer deduct entry against the original debit or Entries showing the general number as credit, so as to prevent exaggeration of allotted by the receiving section and the the transactions in the accounts. sectional number of the originating section. When, however, such a transfer affects a Debt, Deposit and Remittance Head for The addition or deduction, which should which grants are obtained, it should be be posted in Departmental Abstracts or adjusted, irrespective of the amount the Detail Books on account of the involved on the following principles: - transfer entries, should be worked out (a) When the correction is in from the separate transfer entries of all rectification of a sections. This procedure shall consist misclassification of the same mainly of the preparation of an abstract year, - by deduct entry against known as the Combined Ledger and the original debit or credit, as the Abstract (Form AC 25) showing the case may be; debits and credits to be made under each (b) When the correction is in detailed head affected by the entries of rectification of a the month, the totals of the debits and misclassification of the previous credits of the month necessarily being year- plus credit or minus credit equal. The combined transfer ledger and under the heads concerned, abstract for Central transactions should without affecting the debits for be kept separate from that for State the year; provided that in either transactions. case, if the correction involves the transfer of balance from one In the case of revenue and expenditure account circle to another within heads, it is the net outcome of the the accounts of the Central transfer entries against each i.e. the Government, the adjustment in balance of the head, in the Combined both circles must be made Transfer Ledger and Abstract (Form without any reservation within AC25), which should appear as a debit the same official year. or credit in the Abstract but in the case of Debt, Deposit or Remittance Heads, The transfer entries, after being noted in the gross credit and the gross debit the Number Book, should be posted should both appear in the Abstract- the individually into the left hand columns former in the receipt part and the latter in of the Combined Transfer Ledger and the disbursement part, as these heads Abstract, against the respective heads affected. The column for “Number” of </p><p>Participant Note No. 8 7 Courseware designed and prepared by: Regional Training Institute, Allahabad Indian Audit and Accounts Department Structured Courseware on Government Accounting Session: 8 – Transfer Entries the entry and that for the “District or monthly volumes of the Combined Department” which provides for the Transfer Ledger and Abstract should be name of the district or department in arranged in order of the months and whose accounts the original error bound into convenient volumes. appeared should be filled in at the same time.</p><p>From the right hand money columns of the Combined Transfer Ledger and Abstract, the figures should be posted under appropriate heads in the Departmental Abstract of the month in which the error occurred. Transfers affecting a Debt, Deposit and Remittance Head should be made by new entries in the month of correction and need not be noted against the original entry. In the case of important transfers, however, a note should be made in reducing ink, across the original entry in the Detail Book, of the month of its reversal and across the correcting entry of the month of the original one.</p><p>Closing of the Combined Transfer Ledger and Abstract</p><p>The Combined Transfer Ledger and Abstract should be closed by totaling under each head the figures in the columns on the left, and carrying into the columns on the right the balance in the case of revenue and expenditure heads, and the totals in the case of Debt, Deposit and Remittance Heads. The totals of the two money columns on the left need not be carried forward, but amounts in the two money columns on the right hand side should be totaled and agreed. After the Combined Transfer Ledger and Abstract is thus proved by the agreement between the totals of these two columns, an abstract should be drawn up. At the end of the year, the </p><p>Participant Note No. 8 8 Courseware designed and prepared by: Regional Training Institute, Allahabad</p>