Rule 94 of The General Financial Rules 2017 Cost Deduced Accuracy in Commercial Accounts
Original Rule Text
Visual Summary
Ensure accurate cost deduction.
Cost of article/service must be true.
Regulations need government sanction.
Executive Summary
Rule 94 of the General Financial Rules, 2017, mandates that for commercial accounts assessing the cost of articles or services, the Head of the unit must establish adequate regulations, with government approval, to ensure the accuracy and truthfulness of the deduced costs. This rule emphasizes financial propriety and accountability in commercial operations within government entities.
In-Depth Analysis of the Rule
Introduction: Rule 94 is a critical provision within the General Financial Rules, 2017, focusing on the integrity of financial reporting, particularly concerning commercial activities undertaken by government units. It aims to prevent misrepresentation of costs and ensure that public funds are managed with utmost transparency and accuracy.
Breakdown of the Rule:
- Scope: The rule applies specifically to commercial accounts maintained for assessing the cost of an article or service. This implies government units engaging in activities that involve determining the cost of goods produced or services rendered.
- Responsibility of Head of Unit: The primary responsibility for ensuring cost accuracy lies with the Head of the unit. This officer must actively frame and implement regulations.
- Government Approval: A crucial aspect is that these regulations must be framed “with the approval of Government.” This ensures oversight and adherence to broader financial policies.
- Objective: The ultimate goal is to guarantee that “the cost deduced from the accounts is accurate and true,” reinforcing principles of financial propriety and accountability.
Practical Example: Consider a government-run printing press (a commercial unit) that produces textbooks for public schools. Rule 94 dictates that the Head of this printing unit must establish clear, government-approved regulations for calculating the cost of each textbook. These regulations would cover aspects like raw material costs, labor, overheads, and depreciation of machinery. Without such regulations and their strict adherence, the reported cost of textbooks could be inaccurate, potentially leading to inefficient resource allocation or even financial irregularities. The government’s approval ensures that the costing methodology aligns with national financial standards.
Related Provisions
Rule 94 is part of a broader framework for financial management, particularly concerning commercial operations. Other relevant rules include:
- Rule 92 of The General Financial Rules 2017 Subsidiary Accounts Commercial Activities: This rule discusses the maintenance of subsidiary proforma accounts in commercial form for government departments undertaking commercial activities.
- Rule 93 of The General Financial Rules 2017 Subsidiary Accounts Methods Principles: This rule outlines that the methods and principles for keeping commercial subsidiary accounts are regulated by government orders and instructions.
- Rule 84 of The General Financial Rules 2017 Capital or Revenue Expenditure: This rule defines and distinguishes between capital and revenue expenditure, which is fundamental to accurate cost accounting in commercial operations.
Learning Aids
Mnemonics
- ACCURATE COSTS: Always Check Commercial Unit Regulations, Approved by The Executive. This helps remember the key elements of Rule 94.
Process Flowchart
Multiple Choice Questions (MCQs)
1. Who holds the primary responsibility for ensuring cost accuracy in commercial accounts under Rule 94 of the General Financial Rules, 2017?
- A) The Accounts Officer
- B) The Ministry of Finance
- C) The Head of the unit
- D) The Audit Officer
Show Answer
Correct Answer: C) The Head of the unit
2. Rule 94 of the General Financial Rules, 2017 specifically addresses regulations for which type of accounts?
- A) Consolidated Fund accounts
- B) Public Account transactions
- C) Commercial accounts for cost assessment
- D) Contingency Fund operations
Show Answer
Correct Answer: C) Commercial accounts for cost assessment
3. What is a mandatory requirement for the regulations framed under Rule 94 of the General Financial Rules, 2017?
- A) They must be published in the Official Gazette.
- B) They must be approved by the Comptroller and Auditor General.
- C) They must have the approval of Government.
- D) They must be reviewed by an external audit firm annually.
Show Answer
Correct Answer: C) They must have the approval of Government.
4. The primary objective of Rule 94 of the General Financial Rules, 2017 is to ensure that the cost deduced from commercial accounts is:
- A) Competitive and market-driven.
- B) Accurate and true.
- C) Minimized to reduce government expenditure.
- D) Aligned with international accounting standards.
Show Answer
Correct Answer: B) Accurate and true.
5. If a government unit maintains commercial accounts for assessing the cost of an article or service, who is responsible for framing adequate regulations under Rule 94 of the General Financial Rules, 2017?
- A) The Ministry of Finance
- B) The Accounts Officer
- C) The Head of the unit
- D) The Audit Officer
Show Answer
Correct Answer: C) The Head of the unit
Frequently Asked Questions
What is the main purpose of Rule 94 of the General Financial Rules, 2017?
The main purpose of Rule 94 is to ensure that the costs of articles or services deduced from commercial accounts maintained by government units are accurate and true. It mandates the framing of adequate regulations, with government approval, to achieve this.
Who is responsible for framing the regulations under Rule 94 of the General Financial Rules, 2017?
The Head of the unit that maintains commercial accounts for assessing the cost of an article or service is responsible for framing these regulations.
Is government approval necessary for the regulations framed under Rule 94 of the General Financial Rules, 2017?
Yes, the rule explicitly states that the adequate regulations must be framed “with the approval of Government” to ensure their validity and adherence to financial propriety.
Key Takeaways
- Rule 94 focuses on ensuring the accuracy and truthfulness of costs derived from commercial accounts within government units.
- The Head of the unit is primarily responsible for framing the necessary regulations for cost assessment.
- These regulations require explicit approval from the Government to be valid and enforceable.
- The rule underscores the importance of financial propriety and accountability in government commercial operations.
Conclusion
Rule 94 of the General Financial Rules, 2017, serves as a cornerstone for maintaining financial integrity in government commercial undertakings. By mandating rigorous, government-approved regulations for cost assessment, it ensures that public resources are accounted for accurately, fostering transparency and preventing financial discrepancies. Adherence to this rule is vital for sound financial management and public trust.