Chapter 10: Government Accounting in Nepal

10.1 Introduction to Government Accounting

10.1.1 Meaning and Definition

Government Accounting is the systematic process of recording, classifying, summarizing, reporting, and auditing the receipt, allocation, release, and expenditure of public funds by government ministries, departments, offices, and constitutional bodies in strict accordance with parliamentary budget appropriations and financial rules.

• Oshisami and Dean: “Government accounting is the process of recording, analyzing, classifying, summarizing, communicating, and interpreting financial information about government in aggregate and in detail, reflecting all transactions involving the receipt, transfer, and disposition of government funds and property.”

10.1.2 Objectives and Features of Government Accounting

• Features:
  1. Non-Profit Motive: Aimed at public administration, infrastructure development, and social welfare rather than earning profit.
  2. Budgetary Control: All government expenditures are governed by the annual budget passed by Parliament; no office can spend beyond its approved budget head limit.
  3. Double Entry Basis: Based on the principles of the Double Entry System.
  4. Banking Transactions via Treasury Single Account (TSA): All receipts and payments are routed through the Treasury Single Account maintained at Nepal Rastra Bank or designated commercial banks.
  5. Statutory Auditing: Government accounts are subject to internal audit by the District Treasury Comptroller Office (DTCO) and final constitutional audit by the Office of the Auditor General (OAG).
• Objectives:
  1. To record all government revenues and expenditures systematically under prescribed budget heads.
  2. To prevent misuse, embezzlement, and over-expenditure beyond parliamentary budget limits.
  3. To provide reliable financial data for preparing the next fiscal year’s national budget.
  4. To facilitate smooth internal and final constitutional auditing.

10.1.3 Difference Between Government Accounting and Commercial (Business) Accounting

10.2 Evolution and the New Accounting System of the Government of Nepal

10.2.1 Historical Evolution of Government Accounting in Nepal

1. Wasil Banki Sresta Pranali: Introduced in 1871 BS (1814 AD) for simple cash revenue and expenditure tracking.
2. Syaha Sresta Pranali: Introduced in 1936 BS (1879 AD) by Kharidar Gunawanta for larger offices using Syaha, Awarje, and Dhapot.
3. Faram Sresta Pranali: Introduced in 1968 BS (1911 AD) using 51 standardized forms primarily for land revenue (Malpot) offices in Terai and Kathmandu.
4. Bhuktani Sresta Pranali: Introduced in 2017 BS (1960 AD) to classify budget expenditures, serving as a transitional bridge to the modern system.
5. The New Accounting System:
   • An Account Committee formed on 20 Magh 2016 BS drafted the modern Double-Entry Government Accounting System, which was formally approved by King Mahendra on 2 Chaitra 2018 BS (1962 AD) and implemented from Fiscal Year 2019/20 BS.
   • Recently modernized by the Financial Comptroller General Office (FCGO) and approved by the Office of the Auditor General (OAG) through the computerized CGAS (Computerized Government Accounting System), SUTRA (Sub-national Treasury Regulatory Application), and revised 200-Series AGF Forms.

10.2.2 Levels of Accounting: Central Level vs. Operating Level

10.2.3 Important AGF Forms Used in Operating Level Government Accounting

(Both Revised OAG 200-Series AGF Numbers and Legacy Old AGF Numbers are shown below, as NEB questions may cite either)

10.3 Classification of Government Budget Expenditure Heads

These are the 5-digit Budget Expenditure Head Codes used in Nepal Government Accounting for Goswara Vouchers, Budget Sheets, and Statements of Expenditure:

10.4 Treasury Single Account (TSA)

• Meaning: The Treasury Single Account (TSA) is a unified structure of government bank accounts managed by the District Treasury Comptroller Office (DTCO) that provides a consolidated view of government cash resources.
• How TSA Works: Individual operating-level offices do NOT hold separate idle bank balances or issue cheques directly from their own independent bank accounts. Instead, whenever an operating office needs to make a payment, it prepares a Goswara Voucher (AGF 203) and sends a Payment Order Statement (AGF 204) (often electronically via CGAS/EFT) to the DTCO. The DTCO verifies the budget limit and pays the vendor/employee directly from the centralized TSA Single Fund Account (Cr. DTCO - TSA).
• Objectives of TSA:
  1. Eliminates idle cash balances scattered across thousands of government office bank accounts.
  2. Reduces government domestic borrowing costs and interest expenses.
  3. Provides real-time information on daily government revenue collection and budget expenditure.
  4. Strengthens financial discipline and prevents unauthorized spending.

10.5 Goswara Voucher (Journal Voucher — AGF No. 203 / Old AGF No. 10)

The Goswara Voucher is the primary book of original entry in Operating Level Government Accounting. Every transaction is recorded using the prefix Dr. for Debits and Cr. for Credits, and since all payments are routed through the DTCO - Treasury Single Account (TSA), the bank credit leg is written as Cr. DTCO - TSA (or Cr. Nepal Rastra Bank / Bank if traditional bank account is specified).

10.5.1 Rules and Standard Entries for All Three Types of Goswara Vouchers

Type 1: General / Budget Expenditure Goswara Voucher

When any budget expenditure (e.g., Stationery, Furniture, Rent, Water/Electricity, Machinery) is paid by Cheque / TSA Payment Order:

• Rule: Always prefix the budget head with Dr. Budget Expenditure (B.E.) — [Name of Budget Head] and write its 5-digit Budget Head No. in the Budget Head column.

Type 2: Advance Goswara Voucher

1. At the Time of Granting Advance:
   (An advance is not yet a final budget expenditure, so “B.E.” is not written when an advance is given; the intended Budget Head No. is still written, for the budget sheet.)
   • Dr. [Post] [Name of Person/Contractor] — Advance for [Item] (with Budget Head No.)
   • Cr. DTCO - TSA (or Bank)
2. At the Time of Clearing / Settling Advance:
   When the official/contractor submits bills/invoices to clear the advance, there are 3 possible cases:

Type 3: Miscellaneous Goswara Vouchers

10.5.2 Worked Numerical Example: Goswara Vouchers (NEB 5-Mark Standard)

Illustration 10.1:
Prepare Goswara Vouchers (AGF No. 203) for the following transactions of District Education Office, Kathmandu for Mangsir 2082:

1. Mangsir 3: Issued a payment order / cheque of Rs. 45,000 to Section Officer Mr. Kedar Sharma as an advance for purchasing Furniture and Fixtures.
2. Mangsir 12: Paid Rs. 8,000 for Water and Electricity and Rs. 12,000 for Office Materials (Stationery) through TSA payment order.
3. Mangsir 20: Section Officer Mr. Kedar Sharma submitted a furniture purchase bill of Rs. 42,000 and a bank voucher of Rs. 3,000 for cash deposited into the TSA/Bank to clear his advance of Mangsir 3.
4. Mangsir 29: Distributed employee salary for the month of Mangsir: Basic Salary Rs. 2,00,000; Government added 10% for Provident Fund (Rs. 20,000). While distributing salary, 20% for Provident Fund (Rs. 40,000), Rs. 15,000 for Citizen Investment Trust (CIT), and Rs. 2,000 for Social Security Tax were deducted, and the net salary was paid via TSA payment order. The deducted amounts were remitted to the EPF, CIT and the tax office through TSA on the same day.

Solution:

Government of Nepal
District Education Office, Kathmandu
Goswara Voucher (AGF No. 203)

10.6 Bank Cash Book (AGF No. 209 / Old AGF No. 5)

10.6.1 Meaning and Structure of the 5 Major Accounts in Bank Cash Book

The Bank Cash Book (AGF No. 209) is the principal ledger-cum-cash register of an operating-level government office. Every Goswara Voucher affecting cash, bank/TSA, budget expenditure, advance, or miscellaneous items is posted into this book across 5 Major Account Sections (17 Columns):

1. Cash Balance Account (Dr. / Cr.): Records only physical cash or Petty Cash movements.
2. Bank / TSA Balance Account (Dr. / Cr. / Cheque No. / Balance):
   • Any payment by Cheque/TSA is entered in Bank Cr.
   • Any cash/deposit into Bank/TSA is entered in Bank Dr.
3. Budget Expenditure Account (B.H. No. / Rs.):
   • Records actual budget expenditures (Dr. B.E.) and also records Advances Given (because in government accounting, an advance given is temporarily treated as budget spent until year-end; when the advance is cleared, the net adjustment is made).
4. Advance Account (Given Rs. / Cleared Rs.):
   • When advance is granted → Enter in Advance Given column (and also in Budget Expenditure column & Bank Cr. column).
   • When advance is cleared → Enter the original advance amount in Advance Cleared column, and in the Budget Expenditure column enter only the Difference (Actual Bill - Advance). (If Bill = Advance, enter — in Budget Expenditure column; if Bill < Advance, enter the unspent returned amount in brackets (XXX) in Budget Expenditure column and in Bank Dr. column).
5. Miscellaneous Account (Account Title / Dr. Rs. / Cr. Rs.):
   • Records Opening Bank Balance/Revolving Fund (Cr.), Budget Release (Cr.), Petty Cash Fund (Dr. when opened, Cr. when closed), and Salary Deductions if unpaid.

10.6.2 Worked Numerical Example: Bank Cash Book (NEB 5-Mark / 8-Mark Standard)

Illustration 10.2:
Prepare a Bank Cash Book (AGF No. 209) of District Agriculture Office, Chitwan from the following transactions for Poush 2082:

1. Poush 1: Received Revolving Fund / Initial Budget Release order of Rs. 5,00,000 from DTCO/NRB.
2. Poush 5: Paid Rs. 18,000 for Office Materials (22311) and Rs. 25,000 for House Rent (28142) by cheque/TSA.
3. Poush 12: Issued a cheque of Rs. 60,000 to Accountant Ms. Sita Rai as an advance for purchasing Machinery and Equipment (31122).
4. Poush 18: Opened a Petty Cash Fund of Rs. 5,000 by issuing a cheque.
5. Poush 24: Ms. Sita Rai submitted a bill of Rs. 55,000 for Machinery purchased and deposited the remaining cash of Rs. 5,000 into the bank/TSA to clear her advance of Poush 12.
6. Poush 29: Distributed employee salary for Poush: Basic Salary Rs. 1,50,000 (21111) plus 10% Government PF addition Rs. 15,000 (21212), deducting PF Rs. 30,000 and Income Tax Rs. 3,000. All net salary and deductions were remitted to the concerned accounts by cheque on the same day.

Solution:

Government of Nepal
District Agriculture Office, Chitwan
Bank Cash Book (AGF No. 209)

10.7 Budget Sheet (AGF No. 208 / Old AGF No. 8)

10.7.1 Meaning and Three Sections of a Budget Sheet

A Budget Sheet (AGF No. 208) is a columnar ledger maintained by every operating-level government office to monitor approved annual budget allocations, budget releases, and progressive expenditures across each individual 5-digit budget head, ensuring that expenditures never exceed the sanctioned budget.

It is divided into three horizontal parts:

1. Part I: Annual Appropriation / Budget Allocation: Records the approved annual budget for each budget head (plus any supplementary budget or inter-head budget transfer + / -).
2. Part II: Budget Release / Payment Order Transfer: Records cumulative and monthly budget releases received from DTCO under each budget head.
3. Part III: Budget Expenditure: Records monthly and cumulative expenditures (including uncleared advances) under each budget head. (When an advance is cleared, the previous advance is deducted (XXX) and the actual bill expenditure XXX is added in that budget head column).

10.8 Statement of Expenditure (AGF No. 210 / Old AGF No. 13)

10.8.1 Meaning and Importance

The Monthly Statement of Expenditure (AGF No. 210) is a mandatory monthly financial report prepared by every operating-level office at the end of each month and submitted to the Central Office (Ministry/Department) and DTCO. It shows the budget head-wise expenditure of the current month, cumulative expenditure up to the current month, annual budget, remaining budget balance, and the status of uncleared advances and bank balance.

10.8.2 Key Formulas for Statement of Expenditure (AGF No. 210)

1. Total Expenditure Up to Current Month:
   Total Expenditure Up to This Month = Expenditure Up to Previous Month + Current Month’s Net Expenditure
2. Remaining Budget Balance:
   Remaining Budget = Annual Sanctioned Budget - Total Expenditure Up to Current Month
3. Total Release / Total Expenditure Verification (Fund Status Box at Bottom):
   • Total Expenditure (including Advance): Sum of Total Expenditure Up to This Month column.
   • Net Expenditure (excluding Advance): Total Expenditure - Uncleared Advance.
   • Closing Bank / Petty Cash Balance: Total Fund Released - Total Expenditure (including Advance) - Loan Given (if any).

10.8.3 Worked Numerical Example: Statement of Expenditure (NEB 5-Mark / 8-Mark Standard)

Illustration 10.3:
From the following information of District Health Office, Pokhara, prepare a Statement of Expenditure (AGF No. 210) for the month of Falgun 2082:

Additional Information:

1. Total budget release received up to Falgun: Rs. 28,00,000 (including a Petty Cash Fund of Rs. 5,000).
2. Expenditure up to Magh under Machinery and Equipment (31122) includes an uncleared advance of Rs. 50,000 given to Officer Hari.

Solution:

Government of Nepal
District Health Office, Pokhara
Statement of Expenditure for the Month of Falgun 2082 (AGF No. 210)

Summary of Fund Position & Advance Status:

• Total Expenditure up to Falgun (including Advance): Rs. 27,10,000
• Less: Uncleared Advance (Machinery - Officer Hari): (Rs. 50,000)
• Net Actual Expenditure (excluding Advance): Rs. 26,60,000
• Unspent Balance of the Release: Rs. 28,00,000 - Rs. 27,10,000 = Rs. 90,000 (Petty Cash Rs. 5,000 + Bank Balance Rs. 85,000).

10.9 NEB Board Exam Practice Questions

Group A: Very Short Answer Questions (1 Mark Each)

1. Define Government Accounting.
2. When was the New Accounting System introduced in Nepal?
3. Write the Budget Head Numbers for: (a) Remuneration, (b) Office Materials, (c) House Rent, and (d) Furniture and Fixtures.
4. What is the Treasury Single Account (TSA) System?
5. Mention the AGF Form Numbers (New or Old) for: (a) Goswara Voucher, (b) Bank Cash Book, (c) Budget Sheet, and (d) Statement of Expenditure.
6. What is a Budget Sheet? State its three parts.

Group B & C: Short and Long Numerical Questions (5 / 8 Marks)

1. Differentiate between Government Accounting and Commercial Accounting on any five bases.
2. Explain the main features and objectives of the New Government Accounting System of Nepal.
3. Differentiate between Central Level Accounting and Operating Level Accounting.

Worked answers to these exercises are in Chapter 10 Solutions.