Transition to Accrual Accounting | Economic Survey & Government Reports - UPSC PDF Download

 Page 1


Audit
Analysis
Budget
Calculation
Advice
TRANSITION TO ACCRUAL ACCOUNTING:
MODELS AND LEARNINGS FOR URBAN LOCAL BODIES
An ICAI - ICAI ARF study for NITI Aayog  |  January 2023
Transition to accrual accounting: Models and learnings for urban local bodies
The Institute of Chartered 
Accountants of India
Page 2


Audit
Analysis
Budget
Calculation
Advice
TRANSITION TO ACCRUAL ACCOUNTING:
MODELS AND LEARNINGS FOR URBAN LOCAL BODIES
An ICAI - ICAI ARF study for NITI Aayog  |  January 2023
Transition to accrual accounting: Models and learnings for urban local bodies
The Institute of Chartered 
Accountants of India
Page 3


Audit
Analysis
Budget
Calculation
Advice
TRANSITION TO ACCRUAL ACCOUNTING:
MODELS AND LEARNINGS FOR URBAN LOCAL BODIES
An ICAI - ICAI ARF study for NITI Aayog  |  January 2023
Transition to accrual accounting: Models and learnings for urban local bodies
The Institute of Chartered 
Accountants of India
Transition to accrual accounting: 
Models and learnings for Urban 
Local Bodies
An ICAI - ICAI ARF Study for NITI Aayog
January 2023
ICAI Accounting Research 
Foundation
www.icaiarf.org.in
The Institute of Chartered 
Accountants of India
www.icai.org
Page 4


Audit
Analysis
Budget
Calculation
Advice
TRANSITION TO ACCRUAL ACCOUNTING:
MODELS AND LEARNINGS FOR URBAN LOCAL BODIES
An ICAI - ICAI ARF study for NITI Aayog  |  January 2023
Transition to accrual accounting: Models and learnings for urban local bodies
The Institute of Chartered 
Accountants of India
Transition to accrual accounting: 
Models and learnings for Urban 
Local Bodies
An ICAI - ICAI ARF Study for NITI Aayog
January 2023
ICAI Accounting Research 
Foundation
www.icaiarf.org.in
The Institute of Chartered 
Accountants of India
www.icai.org
Transition to accrual accounting: Models and learnings for Urban Local Bodies
ii
https:/ /www.niti.gov.in/
NITI Aayog is the premier policy think tank of the Government of India, providing 
directional and policy inputs. Apart from designing long-term policies and programmes 
for the Government of India, NITI Aayog also provides relevant strategic and technical 
advice to the Centre, States, and Union Territories. NITI Aayog acts as the quintessential 
platform for the Government of India to bring States to act together in national interest 
and thereby foster cooperative federalism.
ICAI ACCOUNTING RESEARCH FOUNDATION
https:/ /icaiarf.org.in
The Accounting Research Foundation (ICAI ARF) of the Institute of Chartered Accountants 
of India (ICAI) is established as a core research body in the areas of accounting, auditing, 
capital markets, fiscal policies, monetary policies, and related disciplines. Over the years, 
it has accelerated its work programme as an academy for imparting, spreading and 
promoting knowledge, learning, education and understanding in various fields related 
to the profession of accountancy. The ICAI ARF has undertaken and completed many 
projects in the past involving basic and applied research.
Authors:
CA (Dr) Murali R. S., Practising Chartered Accountant
CA Ashok Rao, Practising Chartered Accountant 
CA Namrata Khandelwal, Deputy Secretary, ICAI, Project Coordinator
Project Management Team at Managing Urbanisation Vertical of NITI Aayog
Ms. Anshika Gupta, Specialist 
Mr. Dhiraj Santdasani, Associate
Disclaimer:
The opinions/ assertions, expressed in this study are primarily based on the inputs and deliberations 
in interviews with serving and retired officials of multiple municipal bodies, State urban development 
departments and municipal administration directorates, State audit departments, and other change 
agents like accountancy and information technology professionals. The other (non-study) records 
used in the study are based on publicly available information and other sources. Every attempt 
has been made to ensure the accuracy and completeness of data contained in this Report. The 
analysis and arguments employed herein are attributed to the authors of the study only and not 
to the organisation they belong to.
While due care has been exercised to prepare the report using the data from various sources, 
NITI Aayog does not confirm the authenticity of data and the accuracy of the methodology to 
prepare the report. NITI Aayog shall not be held responsible for finding or opinions expressed in 
the document. 
Page 5


Audit
Analysis
Budget
Calculation
Advice
TRANSITION TO ACCRUAL ACCOUNTING:
MODELS AND LEARNINGS FOR URBAN LOCAL BODIES
An ICAI - ICAI ARF study for NITI Aayog  |  January 2023
Transition to accrual accounting: Models and learnings for urban local bodies
The Institute of Chartered 
Accountants of India
Transition to accrual accounting: 
Models and learnings for Urban 
Local Bodies
An ICAI - ICAI ARF Study for NITI Aayog
January 2023
ICAI Accounting Research 
Foundation
www.icaiarf.org.in
The Institute of Chartered 
Accountants of India
www.icai.org
Transition to accrual accounting: Models and learnings for Urban Local Bodies
ii
https:/ /www.niti.gov.in/
NITI Aayog is the premier policy think tank of the Government of India, providing 
directional and policy inputs. Apart from designing long-term policies and programmes 
for the Government of India, NITI Aayog also provides relevant strategic and technical 
advice to the Centre, States, and Union Territories. NITI Aayog acts as the quintessential 
platform for the Government of India to bring States to act together in national interest 
and thereby foster cooperative federalism.
ICAI ACCOUNTING RESEARCH FOUNDATION
https:/ /icaiarf.org.in
The Accounting Research Foundation (ICAI ARF) of the Institute of Chartered Accountants 
of India (ICAI) is established as a core research body in the areas of accounting, auditing, 
capital markets, fiscal policies, monetary policies, and related disciplines. Over the years, 
it has accelerated its work programme as an academy for imparting, spreading and 
promoting knowledge, learning, education and understanding in various fields related 
to the profession of accountancy. The ICAI ARF has undertaken and completed many 
projects in the past involving basic and applied research.
Authors:
CA (Dr) Murali R. S., Practising Chartered Accountant
CA Ashok Rao, Practising Chartered Accountant 
CA Namrata Khandelwal, Deputy Secretary, ICAI, Project Coordinator
Project Management Team at Managing Urbanisation Vertical of NITI Aayog
Ms. Anshika Gupta, Specialist 
Mr. Dhiraj Santdasani, Associate
Disclaimer:
The opinions/ assertions, expressed in this study are primarily based on the inputs and deliberations 
in interviews with serving and retired officials of multiple municipal bodies, State urban development 
departments and municipal administration directorates, State audit departments, and other change 
agents like accountancy and information technology professionals. The other (non-study) records 
used in the study are based on publicly available information and other sources. Every attempt 
has been made to ensure the accuracy and completeness of data contained in this Report. The 
analysis and arguments employed herein are attributed to the authors of the study only and not 
to the organisation they belong to.
While due care has been exercised to prepare the report using the data from various sources, 
NITI Aayog does not confirm the authenticity of data and the accuracy of the methodology to 
prepare the report. NITI Aayog shall not be held responsible for finding or opinions expressed in 
the document. 
iii
India is rapidly urbanizing. Over the past few years, urban development in India has 
received tremendous attention and greater investments than ever before. While cities 
are increasingly becoming responsible for instigating economic growth for the nation, 
they often face severe pressure to provide efficient urban services to the increasing 
urban population. In such a scenario, strong fiscal management at the local level 
becomes very critical for optimal utilization of financial resources. 
One of the critical aspects of implementing strong fiscal management is the mode 
of accounting used for transactions at the municipal level. It is important to realize 
that the quality of information with regard to these transactions plays a critical role 
in enabling decision-makers to take conversant decisions. A large number of urban 
local bodies still follow the cash-based accounting system at the local level, whereas 
worldwide the urban local bodies are shifting to “accrual” based accounting system. 
Accrual based accounting method by virtue of its comprehensiveness provides a 
better understanding of finances for any organization. As cities grow to implement 
mega infrastructure development projects, the accrual accounting system would be 
more reliable to adopt. 
This report on “Transition to Accrual Accounting: Models and Learnings for Urban 
Local Bodies” is an attempt to create a knowledge product based on the wealth 
of experience gathered by various states while implementing the reform. 8 States 
including Bihar, Chhattisgarh, Delhi, Gujarat, Karnataka, Odisha, Rajasthan, and Tamil 
Nadu and Cantonment Boards are covered in the report. Apart from conducting 
primary surveys and in-depth analysis of the selected states, the team has also 
compiled learnings from other States through desk-based research. A stakeholder 
consultation with all the states concerned was also organized to improve the report 
findings. This report would enable greater capacities amongst the States/ULBs that 
are in the process or planning to implement the Accrual-based accounting system. 
I compliment the efforts of the Institute of Chartered Accountants of India (ICAI) in 
the sector and their support in the development of this document. I would also like 
to compliment the Managing Urbanization vertical at NITI Aayog led by Sh Kundan 
Kumar, Advisor, for working on this important knowledge product and effectively 
leading this task along with his team consisting of Mr. Rajesh Gupta, Director, NITI 
Aayog, Ms. Anshika Gupta, Specialist, and Mr. Dhiraj Santdasani, Associate of the 
Managing Urbanisation vertical. 
Suman Bery 
Vice Chairperson , NITI Aayog
Message,  
Vice Chairperson, 
NITI Aayog