Accounting in broad sense, accounting denotes certain theories, measurement rules and procedures for collecting and reporting useful information concerning the activities and objectives of an organisation. In less general terms, accounting is classification, analysis, and interpretation of the financial, or book keeping records of an enterprise. The management of an organisation or enterprise utilises accounting procedures to prepare financial statements to communicate with outside parties. From the functional point of view, accounting includes identification, measurement, recording of business transactions, preparation of a summary of recorded events at the end of a period, and communication of such recorded events. The communication is made through publication of financial statements, such as income statements/profit and loss accounts, balance sheets, cash flow statements, and value added statements. Accountants are also required to supply relevant data as and when needed by management to solve day-to-day problems. The various aspects of accounting are: constructive (theoretical accounting), practical (cost accounting and financial accounting), critical (financial audit and cost audit), communication (managerial accounting and accounting information system), and structural (accounting system design).

The major segments of financial accounting in Bangladesh are: private sector accounting, public sector accounting, non-government organisation accounting, and government accounting. Accounting of all the different types of private sector enterprises (sole proprietorship, partnership, limited companies, and co-operatives as well as enterprises in manufacturing, service, and merchandising) are influenced by various acts.

In preparing their accounts, limited companies follow Schedule XI of the companies act 1994. Companies listed with the Dhaka and Chittagong stock exchanges are to prepare their accounts according to the Securities and Exchange Rules 1987 and the International Accounting Standards (IAS) as adopted by the Institute of Chartered Accountants of Bangladesh, are known as Bangladesh Accounting Standards (BAS). All banks are to prepare their financial statements according to the First Schedule (Form A and Form B) of the Banking Companies Act 1991 and provisions of the Financial Institutions Act 1993. Recently, bangladesh bank has made IAS #30 compulsory for all banks. Financial statements of insurance companies are prepared according to Forms A, B, C, D, E, and F of the Insurance Act 1938. Accounts of partnership businesses are prepared according to the provisions of the Partnership Act 1932. After independence of Bangladesh, the government nationalised many industrial enterprises in 1972 and brought them under five corporations, viz., Bangladesh Jute Mills Corporation, Bangladesh Textiles Mills Corporation, Bangladesh Sugar and Food Industries Corporation, Bangladesh Chemical Industries Corporation and Bangladesh Steel and Engineering Corporation. Five independent accounting systems have also been developed and installed. Also, a new Integrated Accounting System, uniform for nationalised industries, was developed by integrating financial accounting and cost accounting. Accounts of non-government organisations, which receive foreign donations, are to be maintained according to the Foreign Donations (Voluntary Activities) Regulation Rules 1978.

Accounts of the Government The responsibility of the accounting function of the government was entrusted with the Comptroller and Auditor General (C&AG) of Bangladesh. The C&AG (Additional functions) Act 1974 and the Comptroller and Auditor General Additional Functions (Amendments) Act 1974 entrusted the C&AG with accounting functions such as keeping government accounts and preparing commercial accounts, maintaining accounts of statutory public authorities and public enterprises, appropriation and finance accounts, and general financial statements.

The basic accounting and auditing organisational structure of Bangladesh was inherited from British India. Constitutional Reforms in 1919 and the Government of India Act 1935 put forward the need for an independent Auditor General. After the end of the British period, the Pakistan (Audit and Accounts) Order of 1952 and thereafter in Bangladesh, articles 127-132 of the Constitution and the C&AG (Additional Functions) Act of 1974 have replicated the basic framework of the previous centralised audit and accounts system.

The accounts of the government in terms of management are divided into three major divisions, one each for Civil Accounts, Defense Accounts and Railway Accounts, and officers responsible for keeping those accounts are Controller General of Accounts, Controller General of Defense Finance and Additional Director General (Finance) of railway respectively.

Civil Accounts The office of the Controller General of Accounts was established in 1985 by an office memorandum of the Finance Division of the Ministry of Finance. The former offices of the Accountant General (Civil), Accountant General (Works and WAPDA), Accountant General (Post, Telegraph and Telephone) and Additional Accountant General (Foreign Affairs) were reorganised and transformed into 21 departmental (line ministries) accounts offices, each called an office of the Chief Accounts Officer (CAO) and 3 audit directorates, called the office of the Director (Works), office of the Director (Civil) and office of the Director (PT&T). In 1995, these directorates of audit were renamed as Directorates General of Audit.

With the establishment of the CAO offices in 1985, the existing post of the Accountant General (AG) of central accounts was upgraded and renamed as Controller General of Accounts (CGA). This has laid the foundation for departmentalisation of accounts by establishing the offices of the Chief Accounts Officers (CAO) attached to different ministries/divisions.

The enactment of the C&AG Functions (Amendments) Ordinance 1983 empowered the government to keep the accounts of the Republic by any person other than the C&AG. Pursuant to this enactment the legal framework for the separation of accounting from audit is established. The Finance Division, Ministry of Finance issued a memorandum on 17 June 2002 to implement the provision. Although the Civil Accounts, in pursuance of this memorandum, are placed under the administrative control of the Finance Division from the organisational structure of the office of the C&AG, the C&AG mans the offices of the new setup. However, Defense Accounts and Railway Accounts continue to remain under the administrative control of the C&AG.

In pursuance of memorandum of 17 June 2002 issued by the Finance Division, the post of 21 Chief Accounts Officers was initially transformed into 51 and finally 49 through reorganisation. In this new system each CAO is entrusted with the accounting function of a Ministry/Division. The Chief Accounts Officer is responsible to a Principal Accounting Officer (concerned secretary) for the accounting functions of the respective ministries/divisions. He makes payments and/or authorise agencies to pay for expenditures incurred in the ministry/division and the departments under the ministry/division, provide advice and information to the Secretary (principal accounting officer) on financial matters, and assist the CGA in compiling the monthly and annual accounts of the government. In carrying out their responsibilities, the service of the CAO has been placed under the secretary though administratively he reports to the CGA. Therefore, the CAO has dual responsibilities to the Secretary and the CGA.

The CGA is responsible for running the civil accounting functions of the republic. All disbursements of civil departments except the offices of post, telephone and telegraphs, public works, public health and engineering, roads and forests are carried out by the offices of the 49 Chief Accounts Officers (CAOs), 6 Divisional Controller of Accounts (DCAs), 58 District Accounts Officers (DAOs) and 418 Upazila Accounts Officers (UAOs). The offices of the CAOs are attached to ministries/divisions and have the responsibility for the accounting function of the presidency (capital city). The government's accounting functions for the rest of the country are carried out by the offices of DCAs, DAOs and UAOs under the direct administrative control of the CGA.

The monthly accounts of CAOs, DCAs, DAOs and UAOs (the accounts of UAOs are sent with the accounts of DAOs.) are sent to CGA for consolidation and preparation of accounts. In addition, the office of the CGA incorporates Exchange Accounts (between CGA and CGDF) and the Settlement Accounts (between CGA and Railway). The finalised accounts are sent to the Ministry of Finance and respective ministries.

Finance Accounts and Appropriation Accounts Preparation and certification of Annual Finance Accounts and Appropriation Accounts are two major responsibilities entrusted with the C&AG. In fact, on behalf of the C&AG, the CGA prepares finance accounts on the basis of his own accounts, accounts of the Postal Department and the accounts he receives from the CGDF, and the Additional DG (Finance) Railway. The Finance Accounts reflect the total annual receipt and expenditure/payments of the government. In fact it is treated as a balance sheet of the government of Bangladesh.'

In preparing government accounts, the fundamental accounting principle adopted is the cash basis of accounting. Accrued receipts and charges are not included in government accounts. In the same way, assets include only financial items and not physical ones. However, accounts prepared for government departments like Postal, T&T, Railway (which are commercial in nature) include physical assets. These accounts are maintained on a proforma basis and are kept outside formal government accounts.

Appropriation accounts comprise a statement of accounts detailing by account code budget allocation vis-a-vis actual expenditure of different ministries and their subordinate offices with an explanation of variances given by the ministries concerned. Civil Audit Directorate, PT&T Audit Directorate, Defense Audit Directorate and Railway Audit Directorate audit the appropriation accounts prepared by CGA, PT&T officials, CGDF, and Additional DG (Finance), Railway respectively. After being audited, appropriation accounts are furnished to the C&AG, who is to certify the accounts with his audit comments. Thereafter, the C&AG submits the accounts to the Honourable President of the Republic.

Defense Accounts The Controller General Defense Finance (CGDF) is the head of the Military Accounts Department working under the administrative control of the C&AG. With the introduction of the revised system of financial management for the defense forces in 1982, the former office of the Military Accountant General was reconstituted into the office of the Controller General Defense Finance under the Ministry of Defense.

CGDF prepares the accounts of the defense services on a monthly basis with the assistance of 5 Senior Finance Controllers responsible for Army, Navy, Air, Works and Defense Purchase and the 2 Finance Controllers (Miscellaneous and BOF) who report directly to him. In respect of pay and allowance of the defense personnel (other than officers) the system followed is called the war system and involves an imprest system to make payments. However, the pay and allowance of army offices and civilians are paid in the conventional pre-audit system. The Senior Finance Controller, Army is entrusted with the accounting function of pay and allowances of the army. There are 2 Finance Controllers (FC Pay-1 and FC Pay-2) and 7 Area Finance Controllers (for bogra, comilla, chittagong, jessore, rangpur, savar and Logistics areas). Area Finance Controllers (AFCs) prepare a code-wise statement of expenditure on contingent items and local purchases and send it to SFC Army.

FC Pay'1 deals with pay and allowances of officers and prepares the monthly accounts under his jurisdiction and sends the accounts to the SFC Army. FC Pay'2 deals with the pay and allowances of JCO (Junior Commissioned Officer) and other ranks (non-officers) in the Bangladesh Army by sending advances to imprest holders through the banks. There are 397 imprest holders, who disburse cash to the soldiers in their units and send a statement of expenditure to the FC Pay'2 with an Acquittance Roll, prepared for the field pay offices, showing the amount disbursed to individual soldiers. Field Pay Officers (FPO) prepare an individual running ledger account (IRLA) on the basis of the Acquittance Rolls received from Imprest holders. The IRLA details all pay and allowance due and any advances recoverable. The FPOs prepare monthly accounts of adjustments and recoveries and send them to FC Pay'2, who prepare the consolidated accounts and sends them to the SFC Army on a monthly basis. These accounts are completed after receiving statements of expenditure and accounts from imprest holders and FPOs along with details of pension payments paid directly by the banks. Finance Controller (Logistics) disburses the claims for miscellaneous items of his unit like hair cutting, washing, condiment, etc. and is responsible for the formation and scrutiny of contracts for fresh items (meat, fish etc) of the army supply core. He keeps accounts of all financial transactions made under his jurisdiction and sends the accounts to SFC Army on a monthly basis. This office also conducts audit of ATG (Annual Training Grants), ETG (Educational Training Grants) advances, and local audit of accounts of army units and formations under his jurisdiction. The SFC Army receives these monthly accounts from FC Pay'1 and 2 and the 7 AFCs including FC (log), consolidate the accounts and then send them to the office of the CGDF.

The SFC Navy has 3 offices of AFCs under its control. However, the office at Dhaka is the only one in partial operation and the remaining two, one at chittagong and the other at khulna are yet to start working. The accounting procedure followed in Navy is broadly similar to the accounts as outlined for the Army. There are 11 imprest holders now operating for the disbursements of imprest funds to the sailors placed under their unit. The imprest holders send the statement of expenditure to the Finance Controller Navy, who prepares accounts on it and submits the same to the CGDF.

The head of the Air Force Accounts is the SFC Air. 4 AFCs (at dhaka, Chittagong, Jessore and Paharkanchanpur, tangail) under him are not yet operational.The accounting system followed in the Air Force is similar to that of the Army. There are total 8 imprest holders in the Air Force who use the imprest fund for local purchases as well as for pay and allowances, which are subject to audit by SFC Air. SFC Air receives statement of expenditure from imprest holders and prepares monthly accounts, which he sends to CGDF.

All accounting functions (excepting Navy) in connection with Defense purchase are under the control of SFC, DP, who also acts as financial adviser to the Director General Defense Purchase (DGDP). He prepares the accounts of DP and sends them to CGDF.

The Senior Finance Controller, Works, is the Chief Accounts Officer as well as Financial Adviser, Works, in the Military Engineering service (MES) excepting Navy. Each of the 33 offices of Garrison Engineers (GE) has a Unit Accountant (UA) and there are 3 Estate Officers, who send their monthly accounts with vouchers to SFC works. On receiving the vouchers, SFC reviews and issues payment authority to the Bangladesh Bank. Based on this payment authority, the Garrison Engineers issue cheques for payments. SFC works consolidates the accounts received from 36 units and sends these to CGDF.

Under the direct control of CGDF, FC Miscellaneous is responsible for pay and allowances of the civilians working in defense services. The payment system carried out in the office of the FC Miscellaneous is of the conventional pre-audit type and not the imprest one. The FC Miscellaneous prepares monthly accounts based on expenditure and submits them directly to CGDF.

Bangladesh Ordnance Factory (BOF) is a special unit under the defense ministry. It too follows the traditional pre-audit system in making payments including on salary accounts. The FC, BOF, prepares monthly accounts and submits them directly to CGDF for consolidation. Having received the monthly accounts from all branches, CGDF consolidates these in a prescribed classified manner and subsequently, sends them to CGA for preparation of central monthly accounts of the government with information copies to the Ministries of Finance and Defense, three defense services headquarters, and the Defense Forces Division.

Appropriation Accounts On behalf of the C&AG, the Controller General Defense Finance (CGDF) prepares Appropriation Accounts of the Defense services. In each financial year, parliament approves a grant for defense services which is subject to revision at the end of the each financial year. This revised amount is treated as the final budget allocation for the defense services. CGDF prepares the Appropriation Accounts on the basis of 12 months actual expenditure vis-a-vis budget allocation received from different FC/AFC offices with comments on excess expenditure/surplus fund given by the Defense Ministry. The script of the Appropriation Accounts is then sent to the DG, Defense Audit, for audit comments. Thereafter, it is sent to the C&AG for his final approval and audit certification. The office of the CGDF does not prepare Finance Accounts but CGDF provides CGA with necessary accounting information so as to prepare Finance Accounts by CGA.

Railway Accounts The Additional Director General (Finance) of Bangladesh Railway posted by C&AG in Bangladesh Railway under the Ministry of Communication is entrusted with the responsibility of Railway Accounts. He is assisted by a Joint DG (finance) and three FA&CAO (Financial Advisors and Chief Accounts Officers), one for East Zone, one for the West Zone and the third for projects.

Railway Finance was separated from General Finance in 1924 on recommendation of a committee headed by Sir William Acworth. The Railway budget of East Bengal Railway, Pakistan Eastern Railway and afterwards, Bangladesh Railway remained separate up to 30 June 1974, when it was finally amalgamated with the general budget of the government from 1 July 1983. The accounting system of Bangladesh Railway has been designed in such a way that it can fulfill the needs of a government department as well as the requirements of a commercial organisation. The format used for this purpose was adopted in 1960. The accounting principle adopted within Bangladesh Railway is both cash basis and accrual basis of accounting. Receipts and disbursements take place each month against the consolidated fund. The public accounts are sent to the government in a prescribed form known as the Monthly Account Current. The monthly accounts are prepared in a summary statement based on the cash deposited and withdrawn from bangladesh bank.

There are 14 accounting circles in Bangladesh Railway through which all transactions of the Railway are carried out. Of the 14 circles, 8 are in the East Zone and 6 in the West Zone (located at Chittagong and Rajshahi respectively). Each accounting circle maintains detailed records of daily transactions. On the basis of these transactions, they prepare a monthly statement of accounts, which is sent to the Financial Adviser and Chief Accounts Officer/East. Although there is a separate FA&CAO in the West Zone at Rajshahi, the responsibility of compiling accounts is vested with FA&CAO/East. Having received these statements, FA&CAO/East compiles the accounts along with his own under Receipts and Disbursements and submits these statements known as 'Monthly Account Current' to CGA with information copies to C&AG, Ministry of Communications and Ministry of Finance. Bangladesh Railway prepares appropriation accounts to show its actual expenditure vis-a-vis the budget grant attested for it. The FA&CAO/East compiles the appropriation accounts, which are signed by the Director General of Bangladesh Railway after adding his comments on variances from the original grant. The accounts are then sent to the Director General of Railway for audit and thereafter, to the C&AG for certification. The Manager of pay and cash, working under the administrative control of FA&CAO, is entrusted with the responsibilities of maintaining cash received, and with the disbursement of all authorised payments. The Assistant Cashier receives cash remitted from railway stations and cash deposits made by outsiders and the Divisional Paymaster/Assistant Paymaster placed under the Manager of Pay and Cash, (suppliers/contractors) disburses cash.

All financial transactions of Bangladesh Railway are routed through Bangladesh Bank Account No 3. Bangladesh Bank keeps records of all deposits and withdrawals, which are sent to FA&CAO/East in a consolidated statement with a copy to the Ministry of Finance. The earnings of Bangladesh Railway are classified as Abstract x (earnings from coaching traffic), Abstract y (earnings from goods traffic) and Abstract z (sundry earnings). Revenue expenditures of Bangladesh Railway are classified as general administration (expenditure related to pay and allowances, pension and gratuity of officers and staff), repairs and maintenance (maintenance cost of railway assets and pay and allowances of maintenance staff) and operating expenses (costs involved in the operation of train services). Capital expenditure in railway is incurred in creation of new resources for Bangladesh Railway. Such expenditure is funded from the government's development programme. [Md. Shamsul Alam Khan]