Railways launches accrual accounting project on 15 March
The new accounting system could help Railways make better decisions in terms of pricing, for instance
New Delhi: Indian Railways will introduce accrual accounting at its rail coach factory in Kapurthala starting 15 March.
This may seem like a small step for Indian Railways, but it is actually part of an ambitious agenda to make the department, the biggest one run by the federal government, more financially accountable.
Accrual accounting is an accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur.
The experiment at Kapurthala is part of rail minister Suresh Prabhu’s ambitious effort to run Indian Railways like a company.
Currently, the maintenance of accounts at Indian Railways happens at various levels of organization (divisions and workshops, zonal railways, production units and other units under Indian Railways) and is governed by rules and procedures codified in manuals and codes compiled by the government.
According to Indian Railways spokesperson Anil Saxena, the Kapurthala experiment will help Indian Railways understand the challenges it needs to address to switch to the new accounting system. He adds that the railway minister has been stressing on accounting reforms since he has taken over.
The new accounting system could help Railways make better decisions in terms of pricing, for instance.
An official at Indian Railways, who spoke on condition of anonymity, said that the current accounting policy provides details of expenditure and earning data by activity type. The new one would also provide route-wise and train-wise details of costs and revenue to facilitate tariff decisions. This person added that Prabhu wants the production units of Indian Railways to slowly start adhering to international accepted accounting standards and those prescribed by India’s Government Accounting Standards Advisory Board.
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