Contents - GANGAPEDIA

City Development Plan for Allahabad Final Report
(the expenses). In current scenario, the timings of cash receipts and cash payments
may not coincide with earning of revenues or incurrence of expenses. Also, the
measures of performance based on cash basis of accounting are respectable to
alteration though a slight variation in the timings of cash receipts or payments e.g. a
budgetary deficit can be cancelled merely by postponing the payment of certain bills
by a few days. No distinction is made between expenditure on construction of
infrastructural facilities such as roads, JSCs, MTVs, buildings of night shelters etc
and expenditures on routine items such as salaries, rents etc. Similarly, a substantial
expenditure an major changes to an asset that results in an increase in its life is treated
under the cash basis of accounting as no different from the revenue expenditure on
normal repairs and maintenance. Thus cash basis of accounting fails to meet most of
the financial reporting objectives.
The accrual basis is the superior method of accounting for the economic resources of
any organisation. It results in accounting measurement based on the substance of
transactions and events, and thus enhances their relevance, neutrality, timelines,
completeness and comparability. World wide, the use of accrual basis to the fullest
extent practicable is recommended in the government environment
By not following the accrual system of accounting, MCA faces the following
drawbacks:
• Not able to assess the accountability of all the resources that MCA controls
and the deployment of those resources;
• Not able to assess the financial performance, financial position and cash flows
of the entity;
• Cannot make decisions about providing resources for further capital projects
to be undertaken by the MCA;
• Cannot evaluate MCA’s ongoing ability to finance its activities and to meet its
liability and commitment;
• Plan for future funding requirements of assets maintenance and replacement;
• Plan for the repayment of or satisfaction of existing liabilities;
• Manage its cash position and funding requirement;
• Demonstrate its performance in terms of service costs, efficiency and
accomplishments;
• Assess whether current revenues are sufficient to cover the costs of current
programs and services;
• Record the total costs, including depreciation of physical assets and
amortization of intangible assets, of carrying out specific activities;
• Assess whether it can provide and the extent to which it can afford new
programs and services.
For better financial management of any organization, information of overall financial
position of the entity and current assets and liabilities and changes in financial
position is necessary prerequisite.
MCA accounts of receipts and expenditure shall be maintained in such a manner as
prescribed as per Section 142 of MC Adhiniyam, 1959. There is no mandatory
provision for the maintenance of accounts on double entry accrual based system of
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