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MINISTRY OF RAILWAYS, GOVERNMENT OF INDIA
No. CTARA/TPP/2015 Date: 30.10.15
FA&CAOs/Zonal Railways & PUs
Sub: Training in Accrual Accounting for the staff ofAccounts Department of Indian Railways.
00000
In continuation of this Academy's letter of even number dated 25.10.15,please find enclosed two separate Training Modules of the course on "AccrualAccounting in Indian Railways", i.e., Training Module for Supervisors and AccountsOfficers up to Senior Scale". These topics have been selected with the approval ofRailway Board. However, suggestions for additions/revisions to these topics may beforwarded to this Academy for consideration.
Session-wise topics with contents for each of those topics have beenprovided in the above Modules. These modules may be circulated amongst all thesupervisory staff, SSO(A)/Sr.TIA/Sr.ISAs to enable them to come prepared for thecourse, as brought out in this office letter dated 25.10.15.
Q-,--{l~ _Encl: As above (P. Vijaya Kumar) n1
Director 'S IT J 10
1. OSD to Fe (Rlys.), Railway Board, Room No. 430, Rail Bhavanfor the information of FC (Rlys.)
2. Adviser (Accounts), Railway Board, Room No. 423-E,Rail Bhavan, New Delhi
3. Executive Director (AIMS & AR), Railway Board,Room No. 516, Rail Bhavan, New Delhi
4. Director Finance (CCA), Railway Board, Room No. 425Rail Bhavan, New Delhi.
Copy to:
\)"'>1\ ~ -(P. Vijaya Kumar) .A -
Director ~ 1(0
TRAINING MODULE ON ACCRUAL ACCOUNTING FOR OFFICERS UP TO SENIOR SCALE DAY 1
09.00 TO 10.15 HRS. THE NECESSITY OF ACCOUNTING REFORMS AND ACCRUAL ACCOUNTING
Competition from Road Transport; Inadequacy of Govt. of
India funding in the present day context. Capacity saturation and not geared to carry more
Slow capacity augmentation Competing alternatives are more attractive for users Investor’s ability to understand the way IR accounts are
prepared Archaic system of costing and apprehensions on return on
investment Need for shifting to accrual accounting to attract
investment
Looking towards non-govt funding. Accrual Accounting a curtain raiser to investment
10.30 TO 11.45 HRS. PRESENTATION OF RAILWAY ACCOUNTS – COMMERCIAL ACCOUNTING PERSPECTIVE
Non - disclosure of accounting policies, schedules and
notes Balance sheet and its limitations
Block Assets – No detailed information on Assets Investments Inventory
Sundry Debtors and other Receivables Liabilities – Both in project(works) and staff related
liabilities (unfunded Pension, Superannuation benefits and current liabilities arising from disconnect between commitments and
payments Contingent liabilities
Profit & Loss Accounts Depreciation – historical cost of Asset, adhoc policy on
depreciation Provision for retirement benefits Revenue Recognition
Transactions affecting Balance Sheet Defined Contributory Pension Scheme
Investments in PSU/JVs Transactions affecting P & L Accounts
Operating losses of Strategic Lines
Subsidy claims on New Lines Subsidy claims on un-economic branch lines
Provision for Bad and Doubtful Debts(on Receivables from Power Houses and any other-especially Traffic related)
12.00 TO 13.15 HRS. INTER MODAL TRANSPORTATION WITH REFERENCE TO ECONOMY AND ENVIRONMENT
Macroeconomic Factors GDP growth present and projections up to 15th Plan
Period-reality and challenges
Effect of such growth on infrastructure, transport sector and Railways
Make in India, export oriented growth and competitiveness of transport
Sectoral growth and relative contribution
Investments in Roads and Railways Share of Rlys. in Transport Sector and future roles
Modal share in freight traffic Unbalanced modal mix and cost to the economy Comparison of environment and social sustainability of rail
and road traffic Need of integrated approach
International scenario of modal share comparing to IR and lessons for economic sustainability of IR
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. MOTIVATION FOR A CHANGE
DATE 2 09.00 TO 10.15 HRS. CAPACITY CREATION FOR HANDLING ADDITIONAL TRAFFIC LIKE COAL, PARCEL
AND CONTAINERS
Necessity of Strategic Planning Features of Businesses
Freight ; dependence on few commodities Parcel and Sundries
Financial Performance-Earnings and Working Expenses Investments and source of funding and large number of
projects in Pink Book
Planning for 2032 NTDPC assessment of investment requirement by 2032
Line Capacity augmentation Total investment and phasing of funding Prioritisation of DFC, critical feeder routes at
Mines(Coal, Fertilizers & Ore), feeder routes to power plants within coal producing states
Resource Mobilization and source of funding Major issues confronting Rlys Railways investment plant for 2015-2019
Transport Demand Forecasts – Coal Containerisation in Rlys., Other Rlys., - Intermodalism,
multimodalism and logistics capability
10.30 TO 13.15 HRS. FIXED ASSETS & DEPRECIATION
Fixed Assets
Definition and Classification Accounting standards for Fixed Assets Issues relating to Accounting for Fixed Assets
Identification, physical verification & recognition Valuation – Flow Chart for valuation of fixed assets;
fair market value AS-10; rationale of valuation at Rs. 1/-
Depreciation, Impairment, De-recognition
ICAI-Accounting Research Foundation has developed the following types of Fixed Assets (18 Categories) and
Formats for collecting details. (As on date they are submitted to IR Officials for their comments and
suggestions) Lands, Buildings, Bridges/Tunnels/Flyover/Subways Road/Street, Railway Tracks, Track Components,
Furniture and Fixtures, Office Equipments, Vehicles, Plant, Machinery and Equipment, Computers and
Peripherals, Medical Equipments, Loco/Coach/Wagons, Capital Work in Progress, Plant, Machinery and Equipment (Signal), Plant, Machinery and Equipment
(Telecom), Electrical Equipment and Fittings and Intangible Assets.
Composition of Fixed Asset Register Threshold limits, Valuation Methodology Transfer of Assets & Book Adjustments
Amortization of Capital - Block Assets its sanctity to Commercial Accounting
Depreciation Depreciation, Residual Value, Depreciable amount and
depreciation period
Various methods of Depreciation of Assets Provision for Depreciation - Present and accrual
accounting Left over service of Asset Rates of Depreciation ( Schedule XIV of Companies Act,
1956) Present day policy on Depreciation
Treatment in Financial Statements
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. LIFE STYLE MANAGEMENT
DAY 3 09.00 TO 10.15 HRS. COSTING IN INDIAN RAILWAYS- PRESENT DAY PRACTICE, FARE/FREIGHT
STRUCTURE, TARIFF REGULATORY AUTHORITY
Present day practice
Concepts (fixed and variable; long term and short term; fully distributed and common costs, traders cost,
operators and economic costs) and objectives.
Direct and indirect costing Process of Traffic Costing – St-15, Methodology of
coaching costing, types of expenses and stage of apportionment, stages of apportionment of coaching expenses
Preparation of Unit Costs - Grouping Pink Book and Green Book (Group A and B)
Escalation factor Traffic costing in Railways vs Cost computation in
commercial establishments
Traffic costing applications.
Fare & Freight Structure Functions Cost of Services and Value of Services
Determinants of cost of services Value of services which determines the Rail user’s
ability to pay Classification Alternative modes of transportation - customer
willingness to bear Competition
Classification of comparable and related commodities Value of commodity at destination compared to the
originating station
Telescopic Rates and Terminal Costs Passenger’s willingness to pay - different classes
Traditional Freight Structure: uniform tariff, linkage with input costs and cross subsidization.
Dynamic Pricing Policy in the bulk segment
Freight and Passenger Rates for different Classes
10.30 TO 11.45 HRS. COSTING FUTURE ROLES-PROFITABILITY OF OPERATION SUCH AS LINE OF BUSINESS, SERVICE AND JOINT COSTS
To generate detailed revenue and cost inputs for assessing
Profitability of different operations
Profitability of different routes /sections Margins for flexibility in tariff regulation
Capability to evaluate the costs and profitability of individual traffic streams between different pairs of point
and in addition to develop financial statement of various lines.
Facilitate breakdown by main lines of business and main
services as a separate profit centres and also each segment (business upto the level of train as a separate
profit centre) Evolve sound basis and models for identification of joint
costs and its allocation
Provide specific cost information to be used for marketing
purpose. Facilitate a more dependable estimation of both fully allocated costs and marginal costs
True cost of providing a service How much it cost to run a train (passenger or freight) How much it cost to stop a train
Profit and loss status of a Division or a Zone Per Trip Cost Analysis of Rajdhani, Shatabdi and Duronto
Express trains Adequacy of present chart of allocations to meet the
above requirements
12.00 TO 13.15 HRS. ACCRUAL ACCOUNTS AND ACTUARIAL ASESSMENT OF PENSION AND RETIREMENT BENEFITS
Components of retirement benefits, capturing information
to suit present budgetary requirements and short
comings. Pension liability during the last 5 years -to give the extent of liability
Actuarial Calculation Pension & its liability Accounts of pension payments – Present & Future Disbursement of pensions and scrolls
Leave encashment Methods to spread the cost of Fixed Medical Allowance and
Commutation of Pension ARPAN, RELHS
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. FIELD VISIT
DAY 4
09.00 TO 10.15 HRS. EARNINGS IN ACCRUAL PERSPECTIVE
Transfer / apportionment of earnings Necessity of Suspense Head
Accountal & regulation of advance receipts (Liability) PRS Advance reservation vs cancellations (Refunds) Circular Journey Tickets
Compensation Claims (MAR and adjusting to Final Head -Demand No. 12)
Outstanding receipts-present & future (Assets) Voucher Billing-Police, Military, Paramilitary and HOR Postal haulage charges
Under charges – Error Sheets PSU dues
Wharfage and Demurrage Traffic Suspense - various types, realization and
Special Credits. Un-realized – provision for bad &
doubtful debts Demands Recoverable
Diversion Debits
Compensation Claims
Thefts losses, embezzlements and write off Costing of Free passes - should be part of employees’
perks and should be a debit in Profit & Loss Account-It is equivalent to income lost.
10.30 TO 11.45 HRS. STORES AND INVENTORY MANAGEMENT
Introduction-General
Definition as per International Public Sector Accounting Standard-12
AS-2 Valuation of Inventories
Measurement of Inventories Net realizable Value
Recognition as Expense Indian Railways-Plan Heads
7100-Stores in Stock
7200-Workshop Manufacturing Suspense 7300-Misc. Advances-Capital
Valuation of Balances – Cost or Market Price Depiction as “Floating Asset”
Inventory as Current Assets-Rationalization
Information about financial position, performance of its assets
Current Assets and Liabilities and their disclosures to users
IR stores transactions are as per 3101S of Stores Budget
Treatment of inventory in IR and Commercial Accounts
Performance of Inventory in the business throughput Information on firnancial position, performance,
current assets and their disclosure Holding costs, carrying costs are not added to the costs
unlike commercial accounting
Performance Ratios in IR and Commercial Accounting To be put to thinking;
Separate inventory based on source – Capital, Revenue and other Funds
Define Stores in Stock, Purchase Suspense & Sales
Suspense so that they are not shown as a single Suspense Account
Link inventory to working capital management and also funds flow arrangement(exchequer control)
Dividend Liability on items included as scrap in Stores
in Stock is not acceptable as per GAAP Redefine inventory as per GAAP
IAS -2 includes all kinds of stores until they are consumed in operations
Accountal to Final Heads should be based on actual
consumption
DMTR issues to be linked with accountal to Final heads
Priced ledgers - no change required Accountal of Stores transactions - individual
consignees (based on actual consumption Scrap items not fitting into IAS-2
No element of Charged off Stores in IAS-2
Items procured through Non-Stock Indents-Charging off directly
No element of Charged Off Stores when ground balance is available
Rolling Stock spares – separate treatment Capital
spares should be reflected in Closing Balance WTA items – its treatment
PL Numbering system and grouping of Stores (Stores 3101, 3102 and 3103) Existing system may continue
Changes required as per IAS-2 Policy Issues-Stores Suspense Accounts - Redefine
Operating suspense within suspence is not accepted norm- SIS covering Purchase Suspense, SINT, Sales Account and Stock Adjustment Account
Inclusion of Sales transactions is distorting the inventory management; Sales Account should be
separated from the SIS SINT need to be reviewed - as an internal mechanism BAR
Changes in MMIS Link with FMIS to ensure charging is based on actual
consumption Separate Head in Final Accounts and Balance Sheet of
Zonal Railways/Indian Railways
12.00 TO 13.15 HRS. WORKSHOP ACCOUNTS – PRESENT & FUTURE
Introduction – In IR, the system of WMS accounting is akin to Accrual Accounting concepts. However, changes
are to be made based on International Accounting Standards
WMS Account- Whether it is required to be denoted as
Inventory? Is it required to be continued as Capital Suspense?
Workshop Accounting both for production of spares or activities should be independent and should be done away with monthly Account Current of Railways by not clubbing
their activities Each Workshop should be a separate and independent
production/service unit providing services and competing with the other Units (Similar to the outside units selling/providing services to Railways on profit/break-even
basis)
Redefine “Work Order System” as per GAAP
System of absorbing “On Cost Expenditure” – Element of Under/Over Charges
System and accountal/absorption of On Cost expenditure in Railways – akin to Accrual Accounting Standards
Job Costing Accounts are to be redefined. Cost comparison
with standards/yardsticks at every stage of production Arriving at Unit Costs and cost comparison – Average Unit
Cost methods are no more suitable Coach/Wagon/Rake wise costing. Activity based costing
for services, i.e., POH, IOH etc.
Suitable revised MIS implementation Separate Head in Final Accounts and Balance Sheet of
ZR/IR Control over expenditure of WMS transactions through
Budgetary Reviews, through Unit Cost reviews and
Suspense Reviews (periodical) and their reporting Not permitted to continue under Capital Suspense and
shown as Inventories of Railways (Works in Progress is not Inventory)
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. FIELD VISIT
DAY 5
09.00 TO 10.15 HRS. FINANCIAL REPORTING STANDARDS AND STAGES IN CHANGEOVER
Financial Reporting Standards
GASAB, GAAP, AS & IFRS Standards internationally adopted for Govt. departments
on commercial basis
Stages in changeover Assessment of existing system and requirements
including review of legislative frame work with reference to existing laws for smooth transition into accrual accounting
Review of Accounts Manual Business process re-engineering with reference accrual
accounting Categorization, grouping and sub-grouping of assets and
liabilities
Adequacy of existing classification Determination and valuation of fixed assets including
infrastructure assets, current assets, investments, long term liabilities, current liabilities and net worth as on opening balance sheet date.
Preparing formats of financial statements and voucher format in the accrual system.
Preparation of Opening Balance Sheet : This forms the base for switching over. Preparation requires determination of balances of fixed
assets and current assets, and long term and short
term dues and liabilities payable to outsiders. To draw the statement of affairs of the entity as on the
date of B/S and carrying the balances of all assets and liabilities to the next accounting year as OBs. Thus after preparation of OBS, conversion from cash to
accrual based accounting will takes place. Generally govt. units do not have adequate 'base
information to prepare the OBS at one go. Hence they must carry out the whole process of identifying its assets and liabilities and then determine or assess or
assign values in order to place them in the BS. Capturing Data
Identification of Assets and liabilities Designing of formats for capturing data relating to
accrual accounting
Collection of data to prepare complete list of all liabilities and assets
Verification
Physical verification of movable and immovable assets
Physical verification of stores, inventories, cash and investments as a particular date
Valuation of Assets and Liabilities, in case where values are not available from the books and records
Cross checking with original/source document, to the
possible
Compilation Compilation of figures from various records, registers and formats so filled in
Selection appropriate accounting policies and drafting disclosures of accounting policies.
Implementation Preparation of financial statements for the transition
period Training of trainers and training of Finance and
Accounts personnel.
10.30 TO 11.45 HRS. SOCIAL SERVICE OBLIGATIONS
Certain transport activities which are essentially
uneconomic in nature in the larger interest of the economically disadvantaged sections of the society.
Losses on transportation of Essential Commodities carried below cost
Losses on passenger and other Coaching Services
Low Second Class Ordinary Fare Non-suburban commuters availing season tickets
concessions up to a distance of 150 Kms
Commuters availing monthly and quarterly season tickets on suburban tickets Chennai, Kolkata, Mumbai
and Secunderabad Fare concession extended to awardees, sports
tournaments, cancer/handicapped and press
correspondents Concessions extended to Military, Postal and news
papers/magazines. Free transportation of commodities to the areas affected by national calamities
Un-economic branch lines
New Lines opened for traffic during the last 15 years
Compensation for social service obligations in other countries.
12.00 TO 13.15 HRS. COMPUTERISATION
Present(fragmented) and future(integrated, unified,
centrally controlled and holistic utility), ERP (better suited for close knit organizations like Production Units and
Workshops and gradual extension to Zone and Divisions Computerization in Accounts and other than Accounts Evolution of computerization
Hardware-0102 to the present Software- COBAL to the present RDBMS
Absence of focused investment(services) in computerization and lack of central monitoring
Characteristic feature of Other than Accounts
computerization-PRS, FOIs(TMS and RMS), linking weighbridges, interface with public, single program, and
centrally controlled Greater Utility and earned the name as a rugged and
time tested one
Failed to integrate with the Accounting/Accounts requirements-Apportionment, Diversion of Traffic
(Superimposing the apportionment on diverted traffic) Dependence on RITES for apportionment in spite of
having powerful systems – PRS and FOIS
Balance Sheets are paper oriented, no uniform codification. Why can’t Balance Sheet be prepared in
UTS and FOIS systems and transmitted to TAO? Dumping of MIS project
VPN(Budget) and Track Management of Civil Engineering are latest bright stars
Accounts/Accounting related computerization
Individuals interest – Traffic Accounts, 2nd Phase of Inventory Control linking to Stores Suspense Accounts
Payroll/FMIS to PRIME/AFRES Variants as many Divisions/Workshops Starting with fanfare and sullied down spirits at a later
stage throwing into disarray the initial goals
ECoR experiment – adoption of three tier architecture and failure to roll out over all Zones. Fund constraint
Absence of thrust from top with hard determination Inventory Control-Depots are not connected through
network to central server
Works Register, Bills Recoverable have come up because of brighter boys in JAG
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. STRESS MANAGEMENT
DAY 6
09.00 TO 10.15 HRS. NEW SOURCES OF FINANCING – CAPITAL MARKETS, EBR, MULTILATERAL FINANCING & ROLE OF IRFC
Present types of funding Budgetary support by Govt. of India Internal resources
IRFC Necessity to look outside for funding to develop Railway
infrastructure Present IR scenario; dwindling GOI support and
increase in infrastructure needs require enormous
funds Backlog of works (Rs.5.10 lakhs crs.), Competition
from Road Transport, increase in revenue expenditure, burden of dividend and even contribution to DRF is becoming difficult and pension liability, shrinkage of
freight share Capacity saturation, slow capacity augmentation,
thinner govt. funding as IR has to cater for other competing sectors
Safety related investment and expectations from
economy Ways to tap new sources of capital funding – national and
international markets Extra Budgetary Resources (Institutional Financing)i.e.
EBR (IF) –Investment Plan of 2015-2019 with an proposed
outlay of Rs.8.5 lakh Crs. Money markets, equity markets & debt markets
Financial Innovations and alternate finance Institutional Debt market
Banks as intermediaries and credit
Bank Credit Lines of Credit
Financial instruments, institutions
10.30 TO 11.45 HRS. TAXATION AND PERSONAL FINANCE
Regulation/accountal of various taxes payable by Indian
Railways in Accrual accounts Excise, VAT, Sales Tax, Octroi- abatement GST
Income-Tax, FD, NSCs, IPO and Secondary markets & Mutual Funds
12.00 TO 13.15 HRS. DISCUSSIONS
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. VALEDICTORY
TRAINING MODULE ON ACCRUAL ACCOUNTING FOR SUPERVISORS
DAY 1 09.00 TO 10.15 HRS. THE NECESSITY OF ACCOUNTING REFORMS AND ACCRUAL ACCOUNTING
Competition from Road Transport; Inadequacy of Govt. of India funding in the present day context.
Capacity saturation and not geared to carry more Slow capacity augmentation
Competing alternatives are more attractive for users Investor’s ability to understand the way IR accounts are
prepared
Archaic system of costing and apprehensions on return on investment
Need for shifting to accrual accounting to attract investment
Looking towards non-govt funding.
Accrual Accounting a curtain raiser to investment
10.30 TO 11.45 HRS. OVERVIEW OF COMMERCIAL ACCOUNTS
Accounting Concepts & Principles Accounting Standards Cash based Accounting vs Accrual Accounting
General Books Trail Balance
P& L Account, Balance Sheet & its importance in Accrual Accounting
Rectification of Errors
Bank Reconciliation Statement Income & Expenditure Account
Depreciation Analysis of financial statements Techniques of Capital Budgeting
12.00 TO 13.15 HRS. OVERVIEW OF RAILWAY ACCOUNTS
Structure of Govt. Accounts & Railway’s position in overall structure
Railway Accounts vis-a-vis Commercial Accounts
Link-Importance of Suspense Accounts Allocation of Expenditure and Earnings
Separate budget, brief outline of Revenue Demands, Capital Demand No. 16 & Earnings.
Supplementary Demands, Account Current &
Appropriation Accounts. Role of CAG and PAC Transfer Transactions & Remittance Transactions
Capital and Revenue Accounts, Profit & Loss Account and Balance Sheet
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. MOTIVATION FOR A CHANGE
DAY 2 09.00 TO 10.15 HRS. PRESENTATION OF RAILWAY ACCOUNTS – COMMERCIAL ACCOUNTING
PERSPECTIVE
Non - disclosure of accounting policies, schedules and notes
Balance sheet and its limitations Block Assets – No detailed information on Assets Investments
Inventory Sundry Debtors and other Receivables
Liabilities – Both in project(works) and staff related liabilities (unfunded Pension, Superannuation benefits and current liabilities arising from
disconnect between commitments and payments
Contingent liabilities Profit & Loss Accounts
Depreciation – historical cost of Asset, adhoc policy on
depreciation Provision for retirement benefits
Revenue Recognition Transactions affecting Balance Sheet
Defined Contributory Pension Scheme
Investments in PSU/JVs Transactions affecting P & L Accounts
Operating losses of Strategic Lines Subsidy claims on New Lines Subsidy claims on un-economic branch lines
Provision for Bad and Doubtful Debts(on Receivables from Power Houses and any other-especially Traffic
related)
10.30 TO 13.15 HRS. FIXED ASSETS & DEPRECIATION
Fixed Assets Definition and Classification
Accounting standards for Fixed Assets Issues relating to Accounting for Fixed Assets
Identification, physical verification & recognition Valuation – Flow Chart for valuation of fixed assets;
fair market value AS-10; rationale of valuation at
Rs. 1/- Depreciation, Impairment, De-recognition
ICAI-Accounting Research Foundation has developed the following types of Fixed Assets (18 Categories) and Formats for collecting details. (As on date they are
submitted to IR Officials for their comments and
suggestions) Lands, Buildings, Bridges/Tunnels/Flyover/Subways
Road/Street, Railway Tracks, Track Components, Furniture and Fixtures, Office Equipments, Vehicles, Plant, Machinery and Equipment, Computers and
Peripherals, Medical Equipments, Loco/Coach/Wagons, Capital Work in Progress, Plant, Machinery and
Equipment (Signal), Plant, Machinery and Equipment (Telecom), Electrical Equipment and Fittings and Intangible Assets.
Composition of Fixed Asset Register Threshold limits, Valuation Methodology
Transfer of Assets & Book Adjustments Amortization of Capital - Block Assets its sanctity to
Commercial Accounting
Depreciation Depreciation, Residual Value, Depreciable amount and
depreciation period Various methods of Depreciation of Assets Provision for Depreciation - Present and accrual
accounting Left over service of Asset
Rates of Depreciation ( Schedule XIV of Companies Act, 1956)
Present day policy on Depreciation
Treatment in Financial Statements
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. LIFE STYLE MANAGEMENT
DAY 3 09.00 TO 10.15 HRS. COSTING IN INDIAN RAILWAYS- PRESENT DAY PRACTICE, FARE/FREIGHT
STRUCTURE, TARIFF REGULATORY AUTHORITY
Present day practice
Concepts (fixed and variable; long term and short term; fully distributed and common costs, traders cost, operators and economic costs) and objectives.
Direct and indirect costing Process of Traffic Costing – St-15, Methodology of
coaching costing, types of expenses and stage of apportionment, stages of apportionment of coaching expenses
Preparation of Unit Costs - Grouping Pink Book and Green Book (Group A and B)
Escalation factor Traffic costing in Railways vs Cost computation in
commercial establishments Traffic costing applications.
Fare & Freight Structure Functions
Cost of Services and Value of Services Determinants of cost of services
Value of services which determines the Rail user’s
ability to pay Classification
Alternative modes of transportation - customer willingness to bear
Competition
Classification of comparable and related commodities Value of commodity at destination compared to the
originating station Telescopic Rates and Terminal Costs Passenger’s willingness to pay - different classes
Traditional Freight Structure: uniform tariff, linkage with input costs and cross subsidization.
Dynamic Pricing Policy in the bulk segment Freight and Passenger Rates for different Classes
10.30 TO 11.45 HRS. COSTING FUTURE ROLES-PROFITABILITY OF OPERATION SUCH AS LINE OF
BUSINESS, SERVICE AND JOINT COSTS
To generate detailed revenue and cost inputs for assessing
Profitability of different operations Profitability of different routes /sections Margins for flexibility in tariff regulation
Capability to evaluate the costs and profitability of individual traffic streams between different pairs of point
and in addition to develop financial statement of various lines.
Facilitate breakdown by main lines of business and main
services as a separate profit centres and also each segment (business up to the level of train as a separate
profit centre) Evolve sound basis and models for identification of joint
costs and its allocation
Provide specific cost information to be used for marketing purpose. Facilitate a more dependable estimation of both
fully allocated costs and marginal costs True cost of providing a service
How much it cost to run a train (passenger or freight) How much it cost to stop a train Profit and loss status of a Division or a Zone
Per Trip Cost Analysis of Rajdhani, Shatabdi and Duronto Express trains
Adequacy of present chart of allocations to meet the above requirements
12.00 TO 13.15 HRS. ACCRUAL ACCOUNTS AND ACTUARIAL ASESSMENT OF PENSION AND RETIREMENT BENEFITS
Components of retirement benefits, capturing information to suit present budgetary requirements and short comings. Pension liability during the last 5 years -to give
the extent of liability Actuarial Calculation Pension & its liability
Accounts of pension payments – Present & Future Disbursement of pensions and scrolls Leave encashment
Methods to spread the cost of Fixed Medical Allowance and Commutation of Pension
ARPAN, RELHS 13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. FIELD VISIT
DAY 4
09.00 TO 10.15 HRS. EARNINGS IN ACCRUAL PERSPECTIVE
Transfer / apportionment of earnings
Necessity of Suspense Head Accountal & regulation of advance receipts (Liability)
PRS Advance reservation vs cancellations (Refunds)
Circular Journey Tickets Compensation Claims (MAR and adjusting to Final Head
-Demand No. 12) Outstanding receipts-present & future (Assets)
Voucher Billing-Police, Military, Paramilitary and HOR
Postal haulage charges Under charges – Error Sheets
PSU dues Wharfage and Demurrage Traffic Suspense - various types, realization and
Special Credits. Un-realized – provision for bad & doubtful debts
Demands Recoverable Diversion Debits Compensation Claims
Thefts losses, embezzlements and write off Costing of Free passes - should be part of employees’
perks and should be a debit in Profit & Loss Account-It is equivalent to income lost.
10.30 TO 11.45 HRS. STORES & INVENTORY MANAGEMENT
Introduction-General
Definition as per International Public Sector Accounting Standard-12
AS-2 Valuation of Inventories
Measurement of Inventories
Net realizable Value Recognition as Expense
Indian Railways-Plan Heads 7100-Stores in Stock 7200-Workshop Manufacturing Suspense
7300-Misc. Advances-Capital Valuation of Balances – Cost or Market Price
Depiction as “Floating Asset” Inventory as Current Assets-Rationalization
Information about financial position, performance of its
assets Current Assets and Liabilities and their disclosures to
users IR stores transactions are as per 3101S of Stores
Budget
Treatment of inventory in IR and Commercial Accounts Performance of Inventory in the business throughput
Information on financial position, performance, current assets and their disclosure
Holding costs, carrying costs are not added to the costs
unlike commercial accounting Performance Ratios in IR and Commercial Accounting
To be put to thinking; Separate inventory based on source – Capital, Revenue
and other Funds
Define Stores in Stock, Purchase Suspense & Sales Suspense so that they are not shown as a single
Suspense Account Link inventory to working capital management and also
funds flow arrangement(exchequer control)
Dividend Liability on items included as scrap in Stores in Stock is not acceptable as per GAAP
Redefine inventory as per GAAP IAS -2 includes all kinds of stores until they are
consumed in operations Accountal to Final Heads should be based on actual
consumption
DMTR issues to be linked with accountal to Final heads Priced ledgers - no change required
Accountal of Stores transactions - individual consignees (based on actual consumption
Scrap items not fitting into IAS-2
No element of Charged off Stores in IAS-2 Items procured through Non-Stock Indents-Charging
off directly No element of Charged Off Stores when ground
balance is available
Rolling Stock spares – separate treatment Capital spares should be reflected in Closing Balance
WTA items – its treatment
PL Numbering system and grouping of Stores (Stores 3101, 3102 and 3103)
Existing system may continue Changes required as per IAS-2
Policy Issues-Stores Suspense Accounts - Redefine
Operating suspense within suspence is not accepted norm- SIS covering Purchase Suspense, SINT, Sales
Account and Stock Adjustment Account Inclusion of Sales transactions is distorting the
inventory management; Sales Account should be
separated from the SIS SINT need to be reviewed - as an internal mechanism
BAR Changes in MMIS
Link with FMIS to ensure charging is based on actual
consumption Separate Head in Final Accounts and Balance Sheet of
Zonal Railways/Indian Railways
12.00 TO 13.15 HRS. WORKSHOP ACCOUNTS – PRESENT & FUTURE
Introduction – In IR, the system of WMS accounting is
akin to Accrual Accounting concepts. However, changes
are to be made based on International Accounting Standards
WMS Account- Whether it is required to be denoted as Inventory? Is it required to be continued as Capital Suspense?
Workshop Accounting both for production of spares or activities should be independent and should be done away
with monthly Account Current of Railways by not clubbing their activities
Each Workshop should be a separate and independent
production/service unit providing services and competing with the other Units (Similar to the outside units
selling/providing services to Railways on profit/break-even basis)
Redefine “Work Order System” as per GAAP
System of absorbing “On Cost Expenditure” – Element of Under/Over Charges
System and accountal/absorption of On Cost expenditure in Railways – akin to Accrual Accounting Standards
Job Costing Accounts are to be redefined. Cost comparison
with standards/yardsticks at every stage of production Arriving at Unit Costs and cost comparison – Average Unit
Cost methods are no more suitable Coach/Wagon/Rake wise costing. Activity based costing
for services, i.e., POH, IOH etc.
Suitable revised MIS implementation
Separate Head in Final Accounts and Balance Sheet of
ZR/IR Control over expenditure of WMS transactions through
Budgetary Reviews, through Unit Cost reviews and Suspense Reviews (periodical) and their reporting
Not permitted to continue under Capital Suspense and
shown as Inventories of Railways (Works in Progress is not Inventory)
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. FIELD VISIT
DAY 5
09.00 TO 10.15 HRS. FINANCIAL REPORTING STANDARDS
GASAB, GAAP, AS & IFRS Standards internationally adopted for Govt. departments
on commercial basis
10.30 TO 11.45 HRS. SOCIAL SERVICE OBLIGATIONS
Certain transport activities which are essentially
uneconomic in nature in the larger interest of the economically disadvantaged sections of the society.
Losses on transportation of Essential Commodities carried below cost
Losses on passenger and other Coaching Services Low Second Class Ordinary Fare Non-suburban commuters availing season tickets
concessions up to a distance of 150 Kms Commuters availing monthly and quarterly season
tickets on suburban tickets Chennai, Kolkata, Mumbai and Secunderabad
Fare concession extended to awardees, sports
tournaments, cancer/handicapped and press correspondents
Concessions extended to Military, Postal and news papers/magazines. Free transportation of commodities to the areas affected by national calamities
Un-economic branch lines
New Lines opened for traffic during the last 15 years Compensation for social service obligations in other
countries. 12.00 TO 13.15 HRS. STAGES IN CHANGEOVER
Assessment of existing system and requirements including review of legislative frame work with reference
to existing laws for smooth transition into accrual accounting
Review of Accounts Manual
Business process re-engineering with reference accrual accounting
Categorization, grouping and sub-grouping of assets and liabilities
Adequacy of existing classification
Determination and valuation of fixed assets including infrastructure assets, current assets, investments, long
term liabilities, current liabilities and net worth as on opening balance sheet date.
Preparing formats of financial statements and voucher
format in the accrual system. Preparation of Opening Balance Sheet :
This forms the base for switching over. Preparation requires determination of balances of fixed
assets and current assets, and long term and short
term dues and liabilities payable to outsiders. To draw the statement of affairs of the entity as on the
date of B/S and carrying the balances of all assets and liabilities to the next accounting year as OBs. Thus after preparation of OBS, conversion from cash to
accrual based accounting will takes place. Generally govt. units do not have adequate 'base
information to prepare the OBS at one go. Hence they must carry out the whole process of identifying its assets and liabilities and then determine or assess or
assign values in order to place them in the BS.
Capturing Data Identification of Assets and liabilities Designing of formats for capturing data relating to
accrual accounting Collection of data to prepare complete list of all
liabilities and assets
Verification Physical verification of movable and immovable assets Physical verification of stores, inventories, cash and
investments as a particular date Valuation of Assets and Liabilities, in case where values
are not available from the books and records Cross checking with original/source document, to the
possible
Compilation
Compilation of figures from various records, registers and formats so filled in Selection appropriate accounting policies and drafting
disclosures of accounting policies. Implementation
Preparation of financial statements for the transition
period Training of trainers and training of Finance and
Accounts personnel.
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. STRESS MANAGEMENT
DAY 6
09.00 TO 10.15 HRS. NEW SOURCES OF FINANCING – CAPITAL MARKETS, EBR, MULTILATERAL FINANCING & ROLE OF IRFC
Present types of funding Budgetary support by Govt. of India
Internal resources IRFC
Necessity to look outside for funding to develop Railway infrastructure Present IR scenario; dwindling GOI support and
increase in infrastructure needs require enormous funds
Backlog of works (Rs.5.10 lakhs crs.), Competition from Road Transport, increase in revenue expenditure, burden of dividend and even contribution to DRF is
becoming difficult and pension liability, shrinkage of freight share
Capacity saturation, slow capacity augmentation, thinner govt. funding as IR has to cater for other competing sectors
Safety related investment and expectations from economy
Ways to tap new sources of capital funding – national and international markets
Extra Budgetary Resources (Institutional Financing)i.e.
EBR (IF) –Investment Plan of 2015-2019 with an proposed outlay of Rs.8.5 lakh Crs.
Money markets, equity markets & debt markets Financial Innovations and alternate finance Institutional Debt market
Banks as intermediaries and credit Bank Credit
Lines of Credit Financial instruments, institutions
10.30 TO 11.45 HRS. TAXATION AND PERSONAL FINANCE
Regulation/accountal of various taxes payable by Indian
Railways in Accrual accounts Excise, VAT, Sales Tax, Octroi- abatement
GST
Income-Tax, FD, NSCs, IPO and Secondary markets &
Mutual Funds
12.00 TO 13.15 HRS. DISCUSSIONS
13.15 TO 14.30 HRS. LUNCH
14.30 TO 16.00 HRS. VALEDICTORY
