Here are the key points regarding 8 digit vs 7 digit allocation codes in railways accounts: - Traditionally, railway allocation codes had 7 digits to identify the demand, minor head, sub-head and detailed head. - However, with the introduction of project accounting and multiple funding sources for projects, it became necessary to capture the project code as well in the allocation. - To accommodate the project code without changing the existing 7 digit structure, railways moved to an 8 digit allocation code structure. - In the 8 digit code, the first 7 digits remain the same to identify the demand, minor head, sub-head and detailed head. - The 8th digit is used to capture the project code,

2. Date: 10th September, 2011
Venue: ESTC/Lallaguda/Secunderabad
By M.Nageswara Rao, SSO(A)/S.C.Railway, Secunderabad

3. This presentation is only
illustrative and not exhaustive.
Here, I am customized the
Classification of Accounts
expenditure according to Lallaguda
unit needs.

4. The First and foremost is
 Little interest
 One should have little
interest in the allocations
which he/she should do the
work.

5. The Second One is
 Should have Finance Code Volume II
(Classification of Accounts Expenditure and
Earnings) – either a hard copy or soft copy.
 Soft copy of the above one as well as other
Railway Codes and Manuals is available in
the Accounts Office.

6.  Gone are the days, when one is facing so
many difficulties to access to Railway
Codes and Manuals.
 Due to wide use of computers, all codes
and manuals are available at fingertips
(through soft copy).

7.  But most of the people afraid of the big
volume covering nearly 250 pages.
 But the real fact is, if one condenses the
above volume according to his
requirements, it comes in just 50 pages.

8.  Let us check:-
 Remove Hindi version – It bring down the
content from 250 pages to 130 pages.
 Hindi fluent staff if any one, they may
remove english version.

9.  The Finance Code covers Revenue
expenditure, Capital Expenditure and
Earnings.
 However Capital expenditure and Earnings
are very little coverage for LGD unit, so we
can contemplate only on Revenue
expenditure.

10.  For that, Demands 03, 04, 06, 07, 11, 12 and
13 are relevant out of total 11 Demands
( i.e., 03 to 13 Demands)
 So further it bring down from 130 pages to
50 pages only.
 It may come down more, in case of executive
staff, who is concern of his unit/department.

11. Even that 50 pages too meant for
just reference and when ever the
occasion arises only.
 For salaries and other regular
expenses, if one landed in the
correct allocation, they need not
worry about further.

12.  NOW TAKE A PRACTICAL EXAMPLE, BY
SELECTING DEMAND NO. 4 (REPAIRS AND
MAINTENANCE OF PERMANENT WAY AND
WORKS)

13.  In Finance Code II, Demad No.4 has 9 Minor
Heads, 34 Sub Heads and 88 Detailed heads
existed to cover entire Engineering
department expenses in the Zonal Railway.
 However, for LGD, Budget grant covers only
 2 Minor heads (Out of 9 Minor heads)
 3 Sub Heads (Out of 34 Sub Heads)
 4 Detailed Heads (Out of 88 Detailed Heads)

14.  04-112 - Salaries of XEN & ADEN
 04-116 - Salaries of Office staff of
XEN/EWS & ADEN/FBWP/MLY
 04-130 - Contingent expenses
 04-431 - Contractual payments (Only PU
32 has to be operated)
See, how the task is
very simple, if one
Only 4 detailed takes attention to the
heads required allocations necessary
out of 88
for his unit only.
available

15.  The Third and Last one is
 Checkthat correct allocation is covered
under BUDGET GRANT allotted to your
Department or Unit.
 Otherwise, although the allocation is correct
one, but it placed under Annexure K as
“ Expenditure without Grant”

16.  For this purpose, we are distributing copies
of Budget Grant for the current year i.e.,
2011-12 to all the participants in this session.
 Itis classified Department wise and Grant is
available for Sub Head wise and PU wise.
 In addition to that, the important allocations
of Suspense Heads ( Not Revenue allocations)
also compile in one document and
distributing to all the participants.

17.  After arriving the correct allocation, it is the
duty of the staff to glance the above Budget
Grant statement and ensures that funds are
available for the said correct allocation (both
Sub Head and Primary Unit of allocation)
 Ifnot matches with the available grant,
there is a possibility of MIS CLASSIFICATION.

18.  Some times, the activity for which
expenditure may not cover under Budget
grant. In such cases, funds will be asked for
those activities during Budgetary Reviews
such as August Review, Revised Estimates and
Final Modification.
 Otherwisesuch expenditure will be included
in Annexure K as Expenditure without Grant.

19.  The moment the expenditure is going to be
incurred, the executive staff has to identify
primarily the Demand for which the activity
is chargeable.
 For
that recognize of all the Revenue
Demands by staff is must.

20.  Understand of all Demands i.e., 03 to 13 is
very easy, if one visualize the activities
involved in the Demands.
 BECAUSE THE ORDER OF DEMANDS 03 TO 13
ARE PLACED AS PER THEIR ROLE IN THE
TRANSPORTATION ACTIVITY.
I expect, all the participants grasp easily all
the 03 to 13 Demands once followed my
visualization.

21. BOSS

32. Group Demand Demand Name
No
General 3. General Superintendence and Services on
Superintendenc
e and Services Railways
4. Repairs and Maintenance of Permanent Way and Works
Repairs & 5. Repairs and Maintenance of Motive Power
Maintenance
6. Repairs and Maintenance of Carriages and Wagons
7. Repairs and Maintenance of plant and Equipment
8. Operating Expenses-Rolling Stock and Equipment
Operation 9. Operating Expenses-Traffic
10. Operating Expenses - Fuel
Staff Welfare,
11. Staff Welfare and Amenities
Retirement
Benefits and
12. Miscellaneous Working Expenses
Miscellaneous Provident Fund, Pension and other Retirement Benefits
13.

33. DETAILED HEAD PRIMARY UNIT
REPRESENTS THE ACTIVITY REPRESENTS OBJECT OF
EXPENDITURE
INDICATING WHY INDICATING WHAT
Example: 06-230 POH OF COACH Examples: Pay, DA, HRA,
Contractual payments.

34. Minor Heads Sub- Heads Detailed Heads
110 Officers and office 111 Officers--C. & W.
establishment . (Mechanical). 112 Administrative Office establishment-
C. & W.
113 Officers C&W - DMUs
114 Admn. Office establishment C&W,
100 Establishment DMUs
120 Supervisory staff and their office 121 Subordinate supervisory staff-- C.
in offices staff C&W -DMUs(Mechanical) & W.
122 Office staff.
123 Sub. Sup. Staff- DMUs.
124 Office Staff C&W DMUs
130 Contingent expenses 130 same.
(Mechanical) ..
MINOR - 100 SUB - 110 DETAILED - 112
Thus, the final head of account is 06-112
Under this detailed head, Pus 01 to 16 and 20 are
operated.

35. Minor Heads Sub- Heads Detailed Heads
100 Establishment in offices 140 Officers and office 141 Officers-Workshop-E.M.U.
establishment . (Electrical). 142 Officers-Open Line-E.M.U.
143 Officers "Workshop-General
services.
144 Officers-Open Line-General
services
145 Office establishment-
Workshop E.M.U.
146 Office establishment-Open
Line-E.M.U.
147 Office establishment-
Workshop-General
services
148 Office establishment-Open
Line-General services.
MINOR - 100 SUB - 140 DETAILED - 147
Thus, the final head of account is 06-147
Under this detailed head, Pus 01 to 16 and 20 are
operated.

36.  DEMAND NO. - 07
 MINOR HEAD - 100 ( Establishment in Offices)
 SUB HEAD - 110 ( Officers and Office est.-S&T)
 DETAILED HEAD-113 ( Admn. Office est -workshop.)
 Thus final head of account is 07-113
 Under this detailed head, Pus 01 to 16 and 20 are
operated.

37.  DEMAND NO. - 03 (Gen.Suptd & Services)
 MINOR HEAD - 400 ( Materials Management)
 SUB HEAD - 420 ( Stores Depots)
 DETAILED HEAD-422 ( Office Est. (other than stock
 keeping, receipt and
inspections.)
 Thus final head of account is 03-422
 Under this detailed head, Pus 01 to 16 and 20 are
operated.

38.  IT
IS GIVEN AT THE END OF EACH DEMAND IN
THE FINANCE CODE VOLUME II.
 MOSTUSEFUL FOR UNDERSTANDING
ALLOCATIONS IF ONE HAVE ANY AMBIGUITY IN
UNDERSTANDING THE SAME.

39. DEPT. HEAD OF P.U’s expenses
ACCOUNT
MECH 06 -130 18 to 24, Office
27,28,32,99 expenses such
as stationery,
forms, books,
telephone
bills, etc.
ELEC. 06-160 18 to 24 Same as
above
S&T 07-130 18 to 24, Same as
27,28,32,99 above
STORES 03-423 18 to 24, Same as
27,28,32,99 above
ACCOUNTS 03-213 18 to 24, Same as
27,28,32,99 above

40.  UNDER 04, 06 AND 07 DEMANDS
 SUB HEAD 130 IS EXCLUSIVELY FOR
CONTINGENT EXPENSES
 EXAMPLES OF CONTINGENT EXPENSES:
 Office expenses such as stationery, forms,
books, telephone bills, etc.

41. DEBIT CREDIT
EMPLOYEE SALARY 000071 01
CONTRIBUTION HEAD
GOVT 13-890 08 000071 01
CONTRIBUTION

42.  15 - COMPOSITE TRANSFER GRANT (CTG)
 20 - LEAVE ENCASHMENT
 25- CHILDREN EDUCATION LEAVE
(PREVIOUSLY IT IS CALLED AS RTF) -
Operated only in Demand No. 11

43. SIGNIFICANCE OF DIFFERENTIATING
REVENUE FROM CAPITAL
• In simple view,
• REVENUE means Recurring expenditure like
salaries, office expenses, maintenance, fuel
etc.
• CAPITAL means One time expenditure like
acquisition of locos, coaches, etc.

44. • Dr. PROFIT AND LOSS A/C OF X COMPANY Cr.
To Purchases 1,00,000 By Sales 1,20,000
To Salaries 2,000
To Office exp. 5,000
To Rent 5,000
To Profit 8,000
----------- ------------
1,20,000 1,20,000
------------ -------------
BALANCE SHEET OF X COMPANY
CAPITAL AND LIABILITIES ASSETS
CAPITAL 1,50,000 CASH - 1,28,000
ADD: Profit 8,000 FURNITURE - 30,000
------------ 1,58,000
----------- ------------
1,58,000 1,58,000
------------ -------------

45. SIGNIFICANCE OF DIFFERENTIATING
REVENUE FROM CAPITAL
• If I show, the furniture payment Rs.30,000 in Profit and
Loss A/c (instead of Balance Sheet), the profit Rs.8,000
just turn into loss of Rs.22,000. -- To evade Income
tax, this trick is played by companies.
• Similarly if Office expenses Rs.5,000 shows as office
furniture in Balance Sheet(instead of Profit and Loss
A/c), the profit will shoot up from Rs.8,000 to
Rs.13,000. -- To get a loan from banks, by showing
efficient the business they are running. Also termed
this one as WINDOW DRESSING.

46. SIGNIFICANCE OF DIFFERENTIATING
REVENUE FROM CAPITAL
• Take the following live example in which, the
Mistake in this simple categorization cause
irreversible damage and turned two giant
organizations in their field to no more entities.

47. SIGNIFICANCE OF DIFFERENTIATING REVENUE FROM CAPITAL
• ENRON CORPORATION
American energy, commodities, Services
company founded in 1932.
Fortune named Enron "America's Most
Innovative Company" for six consecutive years
 In the year 2000 its revenues were 5 lakh
crores (100 Billion dollars)

48. SIGNIFICANCE OF DIFFERENTIATING
REVENUE FROM CAPITAL
• ENRON CORPORATION
Just because of showing capital receipts as
Revenue receipts i.e., in P & L account, it went
into bankruptcy (I.P) in the year 2001.
The scandal also caused the dissolution of the
Arthur Andersen accounting firm, one of the
top Five World Accounting companies.

49. SIGNIFICANCE OF DIFFERENTIATING
REVENUE FROM CAPITAL
• Arthur Andersen
• Similar miserable story like ENRON COMPANY.
• Founded in 1913
• Andersen, who headed the firm until his death
in 1947, was a zealous supporter of high
standards in the accounting industry.
• Andersen's motto was "Think straight, talk
straight."

50. SIGNIFICANCE OF DIFFERENTIATING
REVENUE FROM CAPITAL
• Arthur Andersen
• Because of It’s wrong practices in accountancy
i.e., showing capital receipts as revenue
receipts, it caused fall of Giant American
company as well as termination of itself.

51. SIGNIFICANCE OF DIFFERENTIATING
REVENUE FROM CAPITAL
• Arthur Andersen
• From a high of 28,000 employees in the US
and 85,000 worldwide, the firm is now down
to around 200 based primarily in Chicago due
to effect of ENRON BANKRUPTCY.

52. HIGHER ORDER THINKING QUESTIONS
WHAT IS THE
LOGICAL
DIFFERENCE
BETWEEN CAPITAL
AND CAPITAL FUND?

53. HIGHER ORDER THINKING QUESTIONS
 IS DEPRECIATION RESERVE FUND
(DRF) A CAPITAL SOURCE OF FINANCE
OR REVENUE SOURCE OF FINANCE ?
GIVE RELEVANT REASON IN SUPPORT
OF YOUR ANSWER ?

54. HIGHER ORDER THINKING QUESTIONS
SINCE LOAN CAPITAL IS DIVIDEND
BEARING ONE, IS THERE ANY OPTION
TO RAILWAYS TO REFUND THE LOAN
TO GENERAL REVENUES?
 GIVE RELEVANT REASONS IN
SUPPORT OF YOUR ANSWER?

55. M A R & D P
DEBIT CREDIT
MISC ADVANCE 121121-02 129121-02
REVENUE
DEMANDS 121201-02 129201-02
PAYABLE
Have you ever
question, why this
allocation is having 8
digits instead of 7
digits?