Relevance of Accrual Accounting for Indian Railways

Recognising the need for transparency and accountability to build stake-holders’ confidence, public service organisations worldwide have been undergoing administrative and accounting reforms, the latter leading to a shift to accrual accounting system. Financial reports produced through accrual accounting are valuable inputs for strategic business decisions for organisations while providing credibility and transparency to the accounts for external stakeholders.

Subsequent to the implementation of accrual accounting in the Indian Railways (IRs), for the first time ever in a Ministry of the Government of India, financial statements were prepared in universally acceptable commercial format to reflect its true and complete financial health and will further facilitate the introduction of the crucial performance costing system in IR. A paradigm shift in its account-keeping in conformity to international standards and incisive costing is expected to secure better business standards and financial returns for the mammoth commercial organisation.