Mastering GFR 2017 (Part 3): The Record Keeping (Chapter 4)
⚠️ Educational Disclaimer
This content is for educational purposes only. While we've prepared this series based on the General Financial Rules (GFR) 2017 (Updated 31st July 2025), please note that:
- This is a simplified interpretation of GFR 2017 for examination preparation
- Errors or omissions may occur despite our efforts to ensure accuracy
- For official, authoritative information, always refer to the official GFR document
- Neither the author nor the website assumes responsibility for any damages, losses, or consequences arising from reliance on this content
- Always verify critical information with your department's official channels before implementation
Introduction
Welcome back to our series on mastering the General Financial Rules! In Part 1, we learned the key definitions. In Part 2, we understood the entire budget life cycle. Now, we're tackling Chapter 4: Government Accounts.
If the Budget (Chapter 3) is the "financial plan," then Accounts (Chapter 4) is the "diary" that records every single rupee as it moves. For your exam, this chapter is all about how money is structured, classified, and tracked.
The Core Principle: "Cash Basis" Accounting
This is the single most important concept in this chapter.
Rule 74: Cash Basis of Accounting
Government accounts are kept on a cash basis.
What it means: A transaction is recorded only when cash is actually paid or received. It does not matter when the bill was raised or when the service was rendered.
Practical Example: If you receive a bill for ₹1 lakh in March but only pay it on April 5th, that expenditure is recorded in the new financial year, not the one ending in March. This is the golden rule of government accounting.
The Three "Chests" of Government
We covered these in Part 1, but Chapter 4 explains how they form the structure of the accounts. All money in the Government Account is organized into these three parts (Rule 77):
1. Part I: Consolidated Fund
The main account. All revenues (taxes) go in, and all expenditures (salaries, schemes) go out.
2. Part II: Contingency Fund
The emergency imprest money held by the President.
3. Part III: Public Account
The "trustee" account. This holds money that doesn't belong to the government (like your GPF).
The "Address Code" for Money (Rule 78)
This is a critical exam topic. To track billions of transactions, every single rupee is given a unique 6-part "address" or classification code. This code tells you exactly what the money is for.
- Major Head (e.g., 2052): Represents a Function of Government (e.g., 'Secretariat-General Services').
- Sub-Major Head (e.g., 00.090): A sub-function within the Major Head (e.g., 'Secretariat').
- Minor Head (e.g., 00.090.102): Represents a Programme (e.g., 'Lok Sabha').
- Sub-Head (e.g., 00.090.102.01): Represents a Scheme (e.g., 'Salaries').
- Detailed Head (e.g., 00.090.102.01.01): Represents a Sub-Scheme (e.g., 'Pay').
- Object Head (e.g., 00.090.102.01.01.01): Represents the final item of expenditure or the "Object" (e.g., 'Pay').
🧠 Easy Way to Remember: The 6-Tier "Address" Analogy
Think of it like sending a letter:
- Major Head: The State (e.g., "U.P.")
- Minor Head: The City (e.g., "Agra")
- Sub-Head: The Area (e.g., "Taj Ganj")
- Detailed Head: The Street (e.g., "Purani Mandi")
- Object Head: The specific House Number (e.g., "House No. 10")
Just as an address pinpoints a house, the accounting code pinpoints exactly what the money was spent on (e.g., "Pay" for "Salaries" under the "Lok Sabha" programme).
Other Key Classifications
Revenue Expenditure
Day-to-day running costs. These do not create assets (e.g., salaries, maintenance, repairs, office expenses).
Capital Expenditure
High-value spending that creates a tangible, permanent asset (e.g., buying a new building, constructing a highway, purchasing heavy machinery).
Voted
Expenditure that is voted on by Parliament (e.g., scheme funds, most salaries).
Charged
Expenditure that is a must-pay liability and is not voted on (e.g., interest on debt, salary of a Judge).
The Digital Revolution: PFMS and DBT
These are the modern tools that run the accounting system. They are very important for your exam.
🎯 Public Financial Management System (PFMS) (Rule 86)
PFMS is the digital backbone of government accounts. It's an integrated IT system that handles the entire financial management process.
Key Exam Points on PFMS:
- It is used for sanction preparation, bill processing, payment, and receipt management.
- It enables 'just-in-time' release of payments, meaning money is sent right when it's needed, reducing the amount of idle cash.
- It tracks the flow of funds, especially to implementing agencies for grants.
- Grantee institutions must submit Electronic Utilisation Certificates (EUCs) on the PFMS portal.
🎯 Direct Benefit Transfer (DBT) (Rule 87)
DBT is a process that uses the PFMS platform to change how benefits are delivered.
What it is: A system to transfer government benefits (cash or in-kind) directly to the bank accounts of beneficiaries.
The Goal: To "minimise intermediary levels," "reduce delay," and "minimise pilferage and duplication".
What it includes: It covers both cash transfers (like LPG subsidy) and in-kind transfers (like food grains).
The "Special" Accounts
🎯 Personal Deposit (PD) Account (Rule 97)
This is a common exam topic because it's an exception to the normal rules.
What it is: A PD Account is an account authorized to be opened in the Public Account (the "trustee" chest).
Who runs it: A designated government officer.
What it does: It allows the officer to credit receipts directly into and make withdrawals directly from this account, bypassing the normal treasury/DDO process.
Key Examples:
- Deposits from Civil or Criminal Courts.
- Money for regulatory activities where a special Act requires a separate fund.
🎯 Proforma Accounts (Rule 92)
What it is: A "commercial-style" account (like a Trading, Profit & Loss Account, and Balance Sheet) for government departments that work on a commercial basis (e.g., an industrial factory).
Why: To accurately calculate the cost of a service or product, which the normal "cash basis" account can't do.
The Year-End "Report Cards"
Finally, at the end of the year, all these accounts are compiled into two major reports for Parliament.
1. Appropriation Accounts (Rule 88)
What it is: This is the "report card" for each Ministry.
What it shows: It compares the final expenditure (what you actually spent) against the total money voted by Parliament (the Grant).
Who prepares it: The Principal Accounts Officer of the Ministry, consolidated by the Controller General of Accounts (CGA).
2. Finance Accounts (Rule 89)
What it is: This is the "annual balance sheet" for the entire Government of India.
What it shows: It shows the total receipts and disbursements of the government, including all transactions under all three Funds (Consolidated, Contingency, and Public).
Who prepares it: The Controller General of Accounts (CGA).
Summary of Part 3
You've just decoded government accounting! The key takeaways are:
- Core Principle: Government accounting is on a Cash Basis.
- Structure: The accounts are divided into the 3 Funds.
- Classification: Every transaction has a 6-tier "address" (Major Head to Object Head).
- Digital Tools: PFMS is the IT system, and DBT is the process for direct delivery.
- Special Cases: PD Accounts are special "trustee" accounts for officers, and Proforma Accounts are for commercial-style bookkeeping.
- Final Reports: Appropriation Accounts (Ministry-wise report card) and Finance Accounts (GoI-wide balance sheet).
Series Navigation:
← Part 2: The Money Plan | Part 3: The Record Keeping | Part 4A: Procurement 101 - The Goods → | Part 4B: Procurement of Services - Consulting vs Non-Consulting →
Coming Up Next...
In Part 4, we'll cover Chapter 6: Procurement 101—the rulebook that governs every single purchase you make, from a box of paper clips to a new fleet of vehicles. This is the most important chapter for most employees.
About This Series: This is Part 3 of a comprehensive 7-part series on GFR 2017 for government employees preparing for departmental exams. Each part covers specific chapters with exam-focused concepts, case studies, and memory tricks.
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