Class 10 Account

The system that systematically and transparently maintains records of all amounts deposited into the government treasury and all expenditures made from that treasury is called the Government Accounting System. It was developed to keep accurate records of revenue collected, foreign grants, loans, and budget allocations for national security, public welfare, administrative operations, and development construction. It helps prevent misuse of public funds, keep government expenditure within budget limits, and make the executive (government) accountable to the legislature (Parliament). In Nepal, this accounting is maintained using forms approved by the Office of the Auditor General under the New Accounting System (NAS).

Although the Government and Commercial Accounting Systems are used for entirely different purposes, the following similarities can be found between them:

• 1. Double Entry System: Both systems follow the Double Entry Accounting principle, whereby every transaction affects both the debit and credit side equally.
• 2. Same Fiscal Year: Both accounting systems follow the same fiscal year cycle (from 1 Shrawan to the end of Ashadh).
• 3. Evidence-based: In both systems, every financial transaction is recorded only on the basis of official verified documents (vouchers, bills, receipts).
• 4. Preparation of Trial Balance: Both prepare a Trial Balance by extracting account balances to verify mathematical accuracy.
• 5. Presentation of Reports: It is the mandatory responsibility of both to prepare and submit financial reports for stakeholders at the end of the fiscal year.

Nepal’s Government Accounting System is divided into two parts based on functional level:

• 1. Central Level Accounting: This accounting is maintained by high-level Ministries, Departments, and Constitutional Bodies that formulate policies, distribute budgets, and supervise subordinate offices. Its main task is to prepare an integrated statement of the total income and expenditure, foreign grants, and loans of itself and all subordinate offices. Example: Accounting maintained by the Ministry of Finance, Ministry of Home Affairs, or the Department of Education.
• 2. Operating Level Accounting: This accounting is maintained by lower-level district or local offices that directly spend the budget and deliver services to the public. Its purpose is to record daily administrative expenditures — wages, office rent, etc. — within the approved budget limit. Example: Accounting maintained by District Administration Offices, District Courts, or Area Land Revenue Offices.

Introduction to Chart of Accounts:
A systematic table of headings, sub-headings, and their assigned code numbers (codes) used for the systematic classification, analysis, and reporting of government financial transactions is called a Chart of Accounts. The Government of Nepal uses a 5-digit coding system for this purpose.

Objectives of the Chart of Accounts:

• To bring uniformity in the classification of government income and expenditure.
• To facilitate computerised recording of financial transactions (e.g., in CGAS software).
• To make budget control and monitoring work simpler and more effective.
• To prepare financial reports that are comparable at national and international levels.
• To make audit work faster and error-free.

The four main areas of Government Accounting in Nepal can be described as follows:

• 1. Revenue Accounting: The area that maintains records of the receipt, bank deposit, and transfer to the Consolidated Fund of the various tax revenues (customs, VAT, income tax) and non-tax revenues (fees, charges, fines) received by the government.
• 2. Appropriation/Expenditure Accounting: The area that maintains up-to-date records of current and capital expenditure, budget releases, and budget spending — all within the limits of the budget approved by Parliament.
• 3. Property/Store Accounting: The area that maintains records of the receipt, use, and balance of furniture, vehicles, machinery, and stationery items purchased or acquired by government offices.
• 4. Deposit/Fund Accounting: The area that maintains separate and organised accounts of security deposits temporarily placed by clients or contractors for government contracts, and of the government’s various emergency or accumulated funds.

In the past, every government office had its own separate bank accounts, making it difficult to immediately know the true status of government funds. The Treasury Single Account (TSA) system was developed to solve this very problem. The main reasons for its development are:

• Improved Cash Management: To obtain real-time information on how much cash remains in the government’s Consolidated Fund.
• Reduction of Costs and Commission: To reduce the service charges, administrative hassle, and interest losses incurred by operating numerous bank accounts.
• Transparency and Accountability: To maintain financial discipline by processing all government transactions through a single bank account under the District Treasury Controller Office (DTCO/KOLENIK A).
• Ease of Bank Reconciliation: To make it simpler and more organised to reconcile (match) office records with bank statements.

Meaning of Government Accounting: The system that regularly and systematically collects, records, classifies, and reports on the state treasury’s income, public expenditure, foreign assistance, national debt, and other government assets — in accordance with prevailing Acts, rules, and established principles — is called Government Accounting. Its main aim is not to earn profit but to protect public funds and ensure that quality services are delivered to citizens within the budget limit.

Bases of Operating Government Accounting in Nepal: The following bases have been established to operate government accounting in Nepal in a systematic and scientific manner:

• 1. Constitutional and Legal Basis: As provided in Parts 15 and 16 of the Constitution of Nepal, accounting operations and audits of the Federal, Provincial, and Local governments are carried out. The Financial Procedures and Fiscal Responsibility Act and its regulations are the primary legal basis.
• 2. Cash Basis of Accounting: Nepal’s government accounting is primarily based on the cash flow principle — income is recognised on the day cash is received, and expenditure is recorded on the day cash is paid. However, some local governments and autonomous public institutions are gradually adopting the Accrual system.
• 3. Treasury Single Account (TSA): The banking mechanism whereby government expenditures at the district level are paid through a single bank account via the DTCO (District Treasury Controller Office) is the main technical basis of this system.
• 4. Nepal Public Sector Accounting Standards (NPSAS): To make accounting internationally standard and transparent, the standards prescribed by the Office of the Auditor General and the Accounting Standards Board are followed.
• 5. Two-tier Accounting Framework: A central-level integrated policy statement and an operating-level accounting framework showing daily work progress form the organisational basis of this system.

In accordance with Nepal’s federal structure, specific legal and practical accounting arrangements exist for governments at all three tiers (Federal, Provincial, and Local) as follows:

• 1. Federal Government Accounting Arrangements:
  • Federal Ministries, Departments, and Constitutional Bodies maintain both central and operating level accounts.
  • Operations are conducted through the Treasury Single Account (TSA) system managed by the District Treasury Controller Office (DTCO/KOLENIKA) and the Accountant General’s Office (MALENIKA).
  • The Computerised Government Accounting System (CGAS) software is used for maintaining accounts.
• 2. Provincial Government Accounting Arrangements:
  • Ministries, Directorates, and district-level offices under Provincial Government maintain accounts in accordance with Provincial Financial Procedures Acts.
  • Provincial expenditure management and budget releases are managed through the Provincial Treasury Controller Office (PROKOLENIK A).
  • Provincial governments also use a modified form of the CGAS system, integrating their financial statements with the federal system.
• 3. Local Government Accounting Arrangements:
  • Gaunpalikas and Nagarpalikas operate their own Consolidated Fund accounts in accordance with the Local Government Operation Act 2074 and the Local Government Accounting Guidelines.
  • A specially developed SUTRA (Sub-national Treasury Regulatory Application) software is used for financial statements and budget formulation at the local level.
  • Internal audit at the local level is conducted by auditors appointed by the local government or by the DTCO, and the final audit is conducted by the Office of the Auditor General.

Meaning of Chart of Accounts: A list of code numbers assigned to all types of financial transactions — grouped into specific categories for the purpose of computerising the accounting system, easily identifying transactions, and controlling budget expenditure — is called a Chart of Accounts. The Government of Nepal has implemented a unified 5-digit coding system.

Types of the Government of Nepal’s Chart of Accounts: Nepal’s government Chart of Accounts is mainly classified into three types:

• 1. Revenue Chart of Accounts: Used to classify the government’s tax and non-tax income. Its first digit starts with 1 (10000).
  • Tax Revenue: Code 11000
  • Grant Revenue: Code 13000
  • Other Revenue: Code 14000
  • Previous Year Cash Balance and Arrears: Code 15000 (Note: Actual amounts are deposited in sub-headings, e.g., Income Tax at 11111.)
• 2. Expenditure Chart of Accounts: Used for government budget appropriations and expenditure headings.
  • Current Expenses: Code starts with 2 (20000). E.g., Remuneration and Employee Benefits: 21000.
  • Capital Expenses: Code starts with 3 (30000). E.g., Machinery and Equipment: 31122.
• 3. Financial Chart of Accounts: Used to maintain accounts of the government’s financial assets (investments, shares) and financial liabilities (domestic and external loans).
  • Domestic Financial Assets: Code 32100
  • External Financial Assets: Code 32200
  • Domestic Financial Liabilities: Code 33100
  • External Financial Liabilities: Code 33200

Determination of Government Accounting Format: In accordance with Article 241 of the Constitution of Nepal, the authority to determine the accounting formats (forms) to be used by offices of all three tiers — Federal, Provincial, and Local — has been vested in the Auditor General (Mahalekha Parikshak). All government offices across Nepal are required to mandatorily use the accounting forms (Ledger Forms) prepared and approved by the Office of the Auditor General.

Use and Classification of Accounting Formats: Separate OAG Form Numbers (म.ले.प.फा.न.) are used in government offices nationwide according to the nature of the transaction. These are divided into the following areas:

• 1. New Accounting System Forms (OAG Form No. 200 series): Used to maintain accounts of government appropriation (budget) expenditure and deposits.
  • OAG Form No. 201: Journal Voucher — for making initial entries of every financial transaction.
  • OAG Form No. 202: Bank Cash Book — for recording daily cash and bank transactions.
  • OAG Form No. 203: Budget Sheet — for monitoring expenditure limits according to budget sub-headings.
  • OAG Form No. 204: Personal Account / Ledger — for maintaining separate accounts of relevant individuals or headings.
• 2. Revenue Accounting Forms (OAG Form No. 900 series): OAG Form Nos. 901 to 911 are used to collect office revenue, deposit it in the bank, and prepare reports. E.g., Daily Revenue Receipt Report, Bank Register, etc.
• 3. Store/Property Accounting Forms (OAG Form No. 400 series): Used to keep records of the physical assets and materials of the office. E.g., Store Receipt Account (OAG Form No. 401), Store Requisition Form (OAG Form No. 403), etc.

Both government and commercial accounting are related to the process of systematically collecting, recording, analysing, and interpreting financial transactions. However, these two types of accounting differ on the following bases: