In order to bring clarity
in the Municipal Financial Management System the
old Single Entry System of Accounting, being
followed by the urban local bodies has been
replaced by Doubled Entry Accrual Based System.
Necessary amendment to the West Bengal Municipal
(Financial and Accounting) Rules, 1999 has been
made in order to provide necessary the chart of
accounts, forms and format and manual on
transaction entries, and also the guideline for preparation of opening Balance
Sheet. This new system has been brought into
force for the Municipalities in KMA area from
the financial year 2006-2007, and the ULBs in
have already prepared the opening Balance Sheet
under the new system, and
for the remaining ULBs the new system has
started from the year
Before introduction of the Double
Entry Accrual Based System of Accounting the ULBs used
single entry cash basis of accounting. The cash basis of
accounting records transactions only on receipt and
payment of cash (for income and expenditure items) and
not when such income and expenses accrue to ULBs. As a
result, an analysis of the true and fair view of the
activities of the ULBs is not possible as income accrued
(but not received) and expenditure incurred (but not
paid for), are not reflected in the financial statements
of the ULBs.
In terms of the recommendations of
the CAG's Task Force on Accounting Reforms for Urban
Local Bodies and the National Municipal Accounts Manual
released by the Ministry of Urban Development,
Government of India, Government of West Bengal has
decided to introduce Accrual Based Double Entry System
in all ULBs in the State. The Government is also
committed to introducing double entry Accrual based
accounting system, in view of the Memorandum of
Understanding signed with Government of India to access
funds under the Urban Reforms Incentive Fund (URIF).
The double entry Accrual System of
accounting has replaced of existing system of single
entry cash based accounting in ULBs.
New Accounting System
The single entry cash basis of accounting has been replaced by double entry Accrual Based System of accounting.
The new accounting system complies with the following requirements, unless mentioned specifically for a different treatment:
Generally Accepted Accounting Principles i.e. Accounting Standards issued by the Institute of Chartered Accountants of India.
The West Bengal Municipal Act, 1993.
West Bengal Municipal(Finance and Accounting), Rules 1999. [Revised rules have been made effective for KMA ULBs from 2006-07 and for the other ULBs from 2007-08.]
National MunicipalAccounts Manual issued by the Ministry of Urban Development, Government of India.
The following important reports will be generated from the double entry Accrual System of accounting.