Rule 13 of the General Financial Rules 2017 Credit of receipts to suspense heads
Original Rule Text
Visual Summary
No Suspense Accounts
Revenue cannot be recorded by putting it into a temporary ‘suspense’ account first.
Realization First
Money must actually be received before it can be officially recorded as government revenue.
Exception Rule
This rule can only be bypassed if a specific rule or order from a competent authority allows it.
Executive Summary
Rule 13 establishes a crucial accounting principle for the government: revenue can only be recorded after the money is actually received. It strictly prohibits the practice of prematurely crediting revenue by using a temporary ‘suspense’ account. This ‘realization principle’ ensures that government financial statements reflect actual income, not just anticipated or promised funds. The only exception is when a competent authority issues a specific rule or order to do otherwise.
In-Depth Analysis of the Rule
Introduction
Rule 13 of the General Financial Rules, 2017, lays down a cornerstone of sound financial management known as the ‘realization principle’. Its primary purpose is to prevent the overstatement of government revenue and ensure that financial records are based on concrete, received funds rather than on expectations. This fosters transparency and fiscal discipline.
Breakdown of the Rule
The rule can be broken down into two main parts:
- The Prohibition: “no sums shall be credited as revenue by debit to a suspense head.” A ‘suspense head’ or ‘suspense account’ is a temporary account used to hold unclassified transactions. This clause forbids the practice of moving money from this temporary account to the official revenue account before the money is actually in the government’s possession. Doing so would be like counting your chickens before they hatch, which is poor financial practice.
- The Principle: “The credit must follow and not precede actual realization.” This is the core of the rule. ‘Realization’ means the actual receipt of cash or its equivalent. The act of crediting (recording) revenue in the government’s books must happen *after* the money has been physically or electronically received.
- The Exception: “Unless specially authorized by any rule or order made by competent authority…” The rule acknowledges that there might be exceptional circumstances. However, bypassing this rule is not a casual decision. It requires a formal, written authorization from a ‘competent authority’—an official or body with the legal power to make such a financial decision.
Practical Example
Imagine the Department of Telecommunications issues a demand notice to a telecom company for Rs. 10 crore in license fees, due on March 30th. The company confirms they will pay but hasn’t transferred the money yet. According to Rule 13, the department cannot record this Rs. 10 crore as revenue for the current financial year. They cannot create an entry in a suspense account and then credit it to revenue to meet a target. They must wait until the Rs. 10 crore is actually credited to the government’s bank account. Only then is the revenue ‘realized’ and can be officially recorded.
Conclusion
Rule 13 is a simple but powerful tool for ensuring the integrity of government accounts. By mandating that revenue is only recognized upon actual receipt, it prevents the artificial inflation of income figures and promotes a realistic and transparent view of the government’s financial position.
Related Provisions
This rule works in conjunction with other rules that govern the handling of government receipts. Understanding these related provisions provides a more complete picture of the financial process:
- Rule 9: Duty of departmental officers to ensure that receipts are credited to Government Account – This rule places the responsibility on departments to ensure all collected money is properly credited. Rule 13 then specifies *how* that credit should be timed and classified.
- Rule 12: Dues to Government not to be left outstanding – This rule focuses on the importance of collecting money owed to the government. Rule 13 deals with the accounting treatment of that money once it is collected (realized).
- Rule 7: Moneys received by Government to be brought into Government Account – This rule mandates that all money received must be promptly deposited into the Government Account. This is the physical act of ‘realization’ that Rule 13 refers to as the trigger for crediting revenue.
Learning Aids
Mnemonics
- CASH: Credit After Securing Handover. This helps remember that revenue is only credited after the cash is actually received.
- REAL: Revenue Entry After Liquidation. This mnemonic emphasizes that the accounting entry for revenue happens only after the due amount is liquidated (paid).
Mindmap
Multiple Choice Questions (MCQs)
1. (Easy) What is the primary condition for crediting a sum as government revenue according to Rule 13?
- A) When the expenditure is approved.
- B) When the amount is promised by a debtor.
- C) After the money is actually realized.
- D) As soon as a bill is issued.
Show Answer
Correct Answer: C) After the money is actually realized.
2. (Medium) Under Rule 13, what is a ‘suspense head’ used for in the context of revenue?
- A) To permanently store all government revenue.
- B) As a temporary holding account, which is generally prohibited for crediting revenue without authorization.
- C) To record all government expenditures.
- D) To calculate the total annual budget.
Show Answer
Correct Answer: B) As a temporary holding account, which is generally prohibited for crediting revenue without authorization.
3. (Hard) A government department receives a specific order from a competent authority allowing it to credit an expected payment of Rs. 50 lakhs to revenue by debiting a suspense head, even before the money is received. What principle of Rule 13 does this action represent?
- A) A violation of the rule, as revenue can never be credited before realization.
- B) The standard procedure for all revenue collection.
- C) The ‘actual realization’ principle.
- D) A specially authorized exception to the general rule.
Show Answer
Correct Answer: D) A specially authorized exception to the general rule.
Frequently Asked Questions
Why can’t the government just record money it’s expecting to receive?
To ensure financial accuracy. Recording expected money as actual income would inflate revenue figures and present a misleading picture of the government’s financial health. This rule enforces a ‘cash basis’ of accounting for revenue, meaning income is recorded only when cash is received.
What is a ‘suspense head’ in simple terms?
Think of it as a temporary waiting room for money. It’s an accounting placeholder used when the final destination or classification of a transaction isn’t yet clear. Rule 13 prohibits using this ‘waiting room’ to prematurely declare money as official government revenue.
Is it ever possible to credit revenue before the money is received?
Only in very rare and specific cases. A ‘competent authority’ must issue a formal rule or order that explicitly allows this. This is an exception to the fundamental principle and is not standard practice.
Key Takeaways
- Money must be in the bank before it can be counted as official government revenue.
- Using temporary ‘suspense’ accounts to record revenue before it’s received is forbidden.
- The core principle is ‘credit follows cash,’ ensuring that financial records are based on reality, not expectations.
- This rule can only be bypassed with special, formal permission from a competent authority.