ICAI to help Telangana adopt accrual system of accounting

Move to help state attract investments in a big way

The Institute of Chartered Accountants of India (ICAI) has suggested the Telangana government to adopt the globally-standard accrual system of accounting in place of the existing cash accounting, which according to it, would help the state attract investments in a big way.

According to the ICAI, the Telangana government has reacted positively to the proposal and the institute would soon form a task force comprising chartered accountants professionals.

“We had a preliminary round of discussion with the government. We have decided to form a task force for them (Telangana government). ICAI members from the region would be involved in the exercise,” said ICAI president Raghu here today.

Telangana is currently following the cash accounting system, which captures the collective income and expenditure. However, accrual system of accounting also covers assets and liabilities. It is based on the accrual principal, under which, revenue is recognised (recorded) when earned, and expenses are recognised when incurred.

Speaking to mediapersons on the sidelines of a two-day national conference for student chartered accountants here, Raghu said, “being a newly-formed state it becomes easy to implement it. Moreover, there is nothing complicated in the system.”

Though the accounting system may not be implemented in all the departments, its adoption in key departments would help the state attract investments in the state government-backed debt and securities.

“Investments will come in a big way if the state could implement it.”

According to Raghu, the ICAI and Indian Railways were in advance stages of discussions for implementing the accrual accounting system across select railway divisions in the next 2-3 years. It hopes to complete the working procedures and training of the accounting staff during the period.

The institute had already trained the accounts department of India Post for putting in place the system.