Government. Sets out accounting criteria for recognizing past errors
In order to check the wrong accounting methods adopted by most of the states to record the adjustments of errors made in the accounts of previous years, the Government has notified a new accounting standard for the States, Union Territories and the Central Government that this How to account for prior period adjustments of the kind.
The standard laid down on the advice of the Comptroller and Auditor General of India (CAG), however, does not cover transactions like payment of arrears arising out of increase in pay or revision of pension or increase in dearness allowance as they cannot be attributed to Could Errors or adjustments in government policies.
Under the cash system of accounting adopted for government accounts, there are no rules for states to deal with prior period adjustments to rectify errors and adjust financial statements of previous years whose accounts were closed. Are.
Ministry of Finance said, “In a study of various finance accounts of states, it is observed that most of the states are not taking cognizance of prior period adjustments in their accounts or passing transfer entries to correct prior period adjustments.” following wrong practice.” ,
The new standard “requires disclosure not only of information that relates to errors in prior periods but also of entries that require prior period adjustments resulting from changes in government decisions that may affect current balances during prior years and may affect the progressive amount for which the accounts have been closed,” it added.
The ministry, which has notified the new norm called Accounting Standard-4 of the Government of India, has also stressed that defaults on loans and grants-in-aid will not be covered under its purview. “It is only a process of rectifying or adjusting the financial statements of prior periods,” it said.