General Principles of Allocation -'Allocation' of expenditure implies identifying its source of Finance and should be distinguished from 'classification' which deals with the detailed heads of account under which expenditure is recorded in the accounting books of the Railway. Railway expenditure is financed from (loan) Capital provided by the General Revenues, Railway Funds and Current Revenues. Accordingly, the expenditure is allocated to
(i) 'Capital',
(ii) the Depreciation Reserve Fund
(iii) the Development Fund,
(iv) the Accident Compensation, Safety and Passenger Amenities Fund,
(v) Open Line Works (Revenue) and
(vi) Ordinary Revenue. The detailed classification of
(a) the expenditure chargeable to Ordinary Revenue is given in Appendix I, and of
(b) Capital and other Works Expenditure chargeable to Depreciation Reserve Fund, Development Fund, Open Line Works (Revenue) or Accident Compensation, Safety and Passenger Amenities Fund is given in Appendix II. The classification of earnings is given in Appendix III. {Appendices I* to III are printed as a separate volume vide Financial Code Volume II). The List of Major and Minor Heads of Accounts of Railway Revenue, Capital, Debt and Remittance Transactions adjusted in Railway Books are, however, given in Appendix IV of Indian Railway Code for the Accounts Department.,
Rules of Allocation
A careful and well-placed analysis of all expenditure and receipt is most necessary to effective financial control. It is the primary object of any accounting classification. It is necessary to secure uniformity of accounting to render suitable comparison between the accounts of different railways. It also helps in preparation of budget and estimates. The labor spent in the classification will be of no use if accounts office fails to maintain proper record as per prescribed classification or if the executive omits to review periodically with the assistance of such record of earning and expenditure for which they are responsible.
The primary responsibility for correct allocation of the initial record in support of receipts and payments rests with the executive offices. The account office is responsible for ensurance of correct allocation. Allocation is the process of indicating nature of expenditure (Head of accounts) under which expenditure is to be finally recorded.
CLASSIFICATION OF EXPENDITURE
The railway expenditure has been classified in to two groups namely: -
1) Capital Expenditure: Under this category such items of expenditure are included which pertain to acquisition of concrete assets, constructions, replacement and renewals of assets such as cost of land, Construction of staff quarters, Construction of Bridges etc.
Expenditure incurred on amenities to passengers and other railway users, amenities to staff, unremunerative operating improvement works when incurred on acquiring concrete assets is not treated as capital expenditure but is accounted for separately under “Development Fund” and “Open Line Works Revenue”.
The Expenditure on renewals and replacements of railway assets is made out from a separate fund commonly known as “Depreciation Reserve Fund”. For the purpose of revenue allocation the revenue
working expenses for the railways are classified under thirteen major heads with a separate abstract for each sub major head.
2) REVENUE EXPENDITURE: - These items of expenditure relate to the working of railway, repairs and maintenance and operation of rolling stock, Plant and Machinery and equipment’s.
The items of expenditure which are incurred on repairs and maintenance of various assets such as railway track, bridges, service and residential buildings etc. are in the nature of day to day expenses. To keep the organization running and also to enable the existing assets to give the same services and to keep them in good service condition for achieving the above purpose the revenue working expenses of the railways has been classified in to thirteen abstracts and each abstract being given a different alphabet to identity the expenditure.
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