Government of Kerala

Abstract

Capacity Building for Municipal Service Delivery in Kerala-Modification to Kerala Municipal

Accounts Manual-orders issued

Local Self Government ( IA) Department

GO (MS) No130 / 2008 / LSGD Thiruvananthapuram , dated 09 . 05.2008

Read: 1. GO (MS) No.8/07/LSGD dated 6-1-07

2. GO (P) No.100/07/LSGD dated 30-3-07
3. GO (MS) No.130/07/LSGD dated 17-5-07
4. Note dated 24.04.2008 from the Project Director, Kerala Sustainable Urban
Development Project, Thiruvananthapuram

ORDER

Govt have issued orders vide reference 1st cited to implement a pilot project to introduce
Double Entry Accrual based Accounting System in all the five Municipal Corporations and the
Municipalities of Thalassery and Alappuzha. Govt have subsequently notified the Kerala Municipality
(Accounts) Rules, 2007 and Kerala Municipal Accounts Manual as applicable to these Local
Governments as Govt Orders read as 2nd & 3rd papers respectively.

The Project Director, Kerala Sustainable Urban Development Project, Trivandrum has
reported as per note read as 4th paper above that on analyzing the functionality of the new system,
some revisions to the Manual are felt necessary. The revisions include changes to the coding
structure as well as the main Manual. Further, the guidelines for valuation of fixed assets issued
after notification of the Manual also have to be included in the Manual.

Govt have examined the proposal of the Project Director, Kerala Sustainable Urban
Development Project and are pleased to accept the proposed modifications as indicated below:
The changes to Kerala Municipal Accounts Manual are given as Appendix 1 to this order.
The additions to the Coding Structures are given as Appendix 2 and the modifications to
Coding Structures are given as Appendix 3.
 The fixed assets valuation guidelines, which will also form part of the Manual, are given as
Appendix 4 to this order.

In the Kerala Municipal Accounts Manual, the following clause will be added as Clause 28 (1)
in Chapter 28-Guidelines for Preparation of Opening Balance Sheet:
"The fixed asset valuation guidelines for the purpose of preparation of opening
balance sheet are given in Appendix 28.1."

Consequent to issue of fixed asset valuation guidelines, there has been some changes to the
depreciation rates. The revised rates of depreciation are given in Appendix 5.

The Kerala Municipal Accounts Manual notified vide GO read as 3rd paper above stands
modified to the above extent.

By Order of the Governor

Sd/-
S.M Vijayanand
Principal Secretary

To
The Accountant General (A&E), Kerala
The Accountant General (Audit), Kerala
The Project Director, Kerala Sustainable Urban Development Project, Trivandrum
The Director of Urban Affairs, Trivandrum
The Director, Local Fund Audit Department, Trivandrum
The State Performance Audit Officer, Trivandrum
The Mayors/Secretaries of Municipal Corporations (Trivandrum, Kollam, Kochi, Thrissur,
Kozhikode)
The Chairman/Secretary, Alappuzha & Thalassery Municipalities

Forwarded / By Order

Sect Officer
 APPENDIX 1

CHANGES TO KERALA MUNICIPAL ACCOUNTS MANUAL

Paragraph
Chapter Existing Paragraph Revised Paragraph
No.
S. Reference
1 Chapter 3 - 3.13 (i) Statutory deductions like Statutory deductions like
Significant Income Tax, Value Added Income Tax, Value Added Tax,
Accounting Tax, Kerala Construction etc. made from the Supplier's
Policies Workers Welfare Fund etc. bill to be recognised when the
made from the Supplier's deductions are made.
bill to be recognised when
the deductions are made.
2 Chapter 3 - 3.14 (b) Statutory deductions from Statutory deductions from
Significant salaries including those for salaries including those for
Accounting Income Tax, Profession Income tax, Profession tax,
Policies Tax, Provident Fund Subscription to Provident Fund,
contribution, etc., shall be etc., shall be recognised as
recognised as liability in the liability in the same period in
same period in which the which the corresponding salary
corresponding salary is is recognised as expenditure.
recognised as expenditure.
3 Chapter 6 - 6.24 All refunds and remissions All refunds and remissions
Property & arising under eligible arising under eligible
Other circumstances as provided circumstances as provided in the
Taxes in the Act and regulations Act and regulations governing
governing the revenues shall the revenues shall be duly
be duly recorded in the recorded in the Demand
Demand registers registers maintained and the
maintained and the details of details of the same shall also be
the same shall also be communicated to the Accounts
communicated to the Department. The reversal shall
Accounts Department. It is be reflected in the current year
to be noted that refund/ revenue incase the revision in
remission on account of the demand relates to the current
reasons referred above year and in any other case the
generally granted for the tax reversal shall be accounted as
amounts only and the prior period expenses.
portion of any other
levy/cess in the original
demand is not
refunded/remitted. The
reversal shall be reflected in
the current year revenue
incase the revision in
demand relates to the
current year and in any other

3
 S. Paragraph
Chapter Existing Paragraph Revised Paragraph
No. Reference
case the reversal shall be
accounted as prior period
expenses.
4 Chapter 12 12.4 (i) Statutory deductions like Statutory deductions like
- Stores Income Tax, Value Added Income Tax, Value Added Tax,
Tax, Kerala Construction etc. made from the Supplier's
Workers Welfare Fund etc. bill to be recognised when the
made from the Supplier's deductions are made.
bill to be recognised when
the deductions are made.
5 Chapter 12 12.46 (c) At the end of the financial At the end of the financial year,
- Stores year, the Stores-in-charge, the Stores-in-charge in presence
the Accounts Officer and the of the Auditors or in his absence
Auditors shall physically in the presence of the Accounts
verify the stock lying in Officer, shall physically verify
stores and compare it with the stock lying in stores and
the stock as per the Book compare it with the stock as per
records and in case of any the Book records and in case of
difference, appropriate any difference, appropriate
remedial steps as prescribed remedial steps as prescribed by
by the Municipality shall be the Municipality shall be taken;
taken;
6 Chapter 13 13. 2 (b) Statutory deductions from Statutory deductions from
- Employee salaries including those for salaries including those for
Related Income Tax, Profession Income tax, Profession tax,
Transactio Tax, Provident Fund Subscription to Provident Fund,
ns contribution, etc., shall be etc., shall be recognised as
recognised as liability in the liability in the same period in
same period in which the which the corresponding salary
corresponding salary is is recognised as expenditure.
recognised as expenditure;
Chapter 14 14.15 At the period-end, the At the period-end, the Health
- Health & Health Department shall Department shall ensure that all
Sanitation ensure that all the bills the bills received in respect of
received in respect of expenditures incurred before the
expenditures incurred before last date of the accounting
the last date of the period, are processed and
accounting period, are forwarded to the Accounts
processed and forwarded to Department for accounting and
the Accounts Department payment within 15 days from
for accounting by 30th April the end of the accounting period.
of the next financial year if
the accounting period is a
financial year and in other
cases in 15 days from the

4
No
Chapter Existing Paragraph Revised Paragraph
Reference
end of the accounting
period.

8 Chapter 16 16.5 (e) At the end of the financial The Municipality shall have a
- year, the Implementing system of conducting physical
Transferred Officer, Accounts Officer verification of fixed assets of the
Institutions and the Auditor shall Transferred Institutions
physically verify the fixed throughout the year so that each
assets and stock lying in fixed asset is verified at least
stores and compare it with once during the year. Any
the records and in case of discrepancies with the Fixed
any difference, appropriate Assets Register should be
remedial steps as prescribed reconciled;
by the Municipality shall be f. At the end of the financial
taken. year, the Stores-in-charge in
presence of the Auditors or in
his absence in the presence of
the Accounts Officer, shall
physically verify the stock lying
in stores of the Transferred
Institutions and compare it with
the stock as per the Book
records and in case of any
difference, appropriate remedial
steps as prescribed by the
Municipality shall be taken;

5
 S. Paragraph
Chapter Existing Paragraph Revised Paragraph
No. Reference
9 Chapter 18 18.23 Creation of Escrow Creation of Escrow Account:
Account: Where the terms Where the terms of sanction for
Borrowing of sanction for raising loan raising loan or issuing
s or issuing debentures debentures provide for the
provide for the establishment of an Escrow
establishment of an Escrow Account, an amount equivalent
Account, an amount to that stipulated in the sanction
equivalent to that stipulated shall be transferred to the
in the sanction shall be Escrow Account based on
transferred to the Escrow collections of earmarked
Account based on income. For e.g. if a loan has
collections of earmarked been taken for building Water
income. For e.g. if a loan Supply Infrastructure, then out
has been taken for building of the water supply income
Water Supply Infrastructure, collected, an amount equal to
then out of the water supply certain percentage of water
income collected, an amount charges shall be deposited into
equal to certain percentage the Escrow Account. For
of water tax shall be creation of Escrow Account, the
deposited into the Escrow Accounts Department shall pass
Account. For creation of the following entry:
Escrow Account, the
Accounts Department shall
pass the following entry:
10 Chapter 19 19.29 (b) The Accounts Officer and The Accounts Officer and/or
- Special other officer designated in other officer designated in this
Funds this behalf shall ensure behalf shall ensure timely
timely transfer of mandatory transfer of mandatory
contribution to Special Fund contribution to Special Fund
Bank Accounts. Bank Accounts.
II Chapter 20 20.33 The schedules of Income The schedules of Income and
and Expenditure Statement Expenditure Statement in
Investment in respect of the income respect of the income earned
s earned from Municipal Fund from Investments are provided
Investments are provided below.
below.
12 Chapter 21 21.42 (c) The Accounts Officer shall The Municipality shall have a
- Fixed have a system of conducting system of conducting physical
Assets physical verification of verification of fixed assets
fixed assets throughout the throughout the year so that each
year so that each fixed asset fixed asset is verified at least
is verified at least once once during the year. Any
during the year. Any discrepancies with the Fixed
discrepancies with the Fixed Assets Register should be
Assets Register should be reconciled;
reconciled;

6
 Paragraph
Chapter Existing Paragraph Revised Paragraph
S.
No. Reference
13 Chapter 22 22.30 ( b) The Accounts Officer shall The Municipality shall have a
- Lease & - 2nd have a system of conducting system of conducting physical
Hire bullet physical verification of verification of fixed assets
Purchase fixed assets throughout the throughout the year so that each
year so that each fixed asset fixed asset is verified at least
is verified at least once once during the year.
during the year. Additionally, a periodical
Additionally, a periodical confirmation of the assets held
confirmation of the assets under operating lease from the
held under operating lease lessee shall also be obtained.
from the lessee shall also be Any discrepancies with the
obtained. Any discrepancies Fixed Assets Register and the
with the Fixed Assets physical verification sheets or
Register and the physical confirmation shall be reconciled.
verification sheets or
confirmation shall be
reconciled.
14 Chapter 27 27.3 Preparation of Financial Preparation of Financial
- Financial Statements comprising of Statements comprising of
Statements various reports as stated various reports as stated below
below is the responsibility is the responsibility of the
of the Accounts Officer and Secretary, who shall cause to
the Secretary, who shall prepare the same as per Section
cause to prepare the same as 294 (1) of the Act. However,
per Section 294 (1) of the other reports such as Auditor's
Act. However, other reports report and Secretary's report on
such as Auditor's report and the Financial Statements shall be
Secretary's report on the prepared by the Auditor and
Financial Statements shall Secretary respectively.
be prepared by the Auditor
and Secretary respectively.
15 Chapter 27 27.4(c) Audit Report Audit Certificate
- Financial
Statements
16 Chapter 27 27.4(d) Secretary's Report on the Secretary's Report on the
- Financial Annual Financial Statements Annual Financial Statements
Statements and the qualifications and and the qualifications and
comments made in the Audit comments made in the Audit
Report Certificate
17 Chapter 27 27.62 The Secretary shall in his The Secretary shall in his report
- Financial report include his comments include his comments on the
Statements on the Audit Report, Audit Certificate, including
including explanations explanations relating to
relating to qualifications qualifications mentioned by the
mentioned by the Auditors, Auditors, stating clearly the
stating clearly the facts of facts of the matter and the steps

7
 S. Chapter
Paragraph
No. Existing Paragraph Revised Paragraph
Reference
the matter and the steps taken in respect of those
taken in respect of those qualifications. The Secretary
qualifications. The Secretary shall also comment upon the
shall also comment upon the performance of the Municipality
performance of the based upon the results of the
Municipality based upon the Financial Performance
results of the Financial Indicators. In respect of any
Performance Indicators. In adverse performance, as
respect of any adverse reflected by the result of any
performance, as reflected by Performance Indicator, the
the result of any Secretary shall, in his report,
Performance Indicator, the explain the reason therefore and
Secretary shall, in his report, shall also state the steps taken to
explain the reason therefore improve performance in that
and shall also state the steps area.
taken to improve
performance in that area.
18 Chapter 27 27.64 The Standing Committee for 27.64 The Standing Committee
- Financial Finance shall prepare an for Finance shall prepare an
Statements Action Taken Report on the Action Taken Report on the
Annual Financial Statements Annual Financial Statements
submitted to it for approval. submitted to it for approval. The
The Report shall in addition Report shall in addition to such
to such information as may information as may be
be prescribed by the prescribed by the Government,
Government, provide details provide details of the action
of the action taken by the taken by the Municipality in
Municipality in respect of respect of the qualifications
the qualifications made in made in the Audit Certificate
the Report of the Audit and the Secretary's Report.
Report and the Secretary's
Report.
19 Chapter 27 27.65 The Action Taken Report The Action Taken Report shall
- Financial shall contain a section for contain a section for Standing
Statements Standing Committee for Committee for Finance's
Finance's comments on the comments on the comments and
comments and qualifications qualifications contained in the
contained in the Report of Audit Certificate issued by the
the Director of Local Fund Director of Local Fund Audit
Audit and the Secretary's and the Secretary's Report.
Report.

8
 APPENDIX 2

ADDITIONS TO THE EXISTING CODES

Fund

Major Minor
Fund Fund Fund
Code Code
0 3 0 0 Development Authority Fund

Function

Function Sub Sub-Sub

Function Functi
Group on Function Description
Code
Code Code Code
9 0 9 8 0 0 0 0 Entertainment Tax

Account Heads - Income

Detailed Detailed
Major Head Minor Description
Head Head Sub-Head
1 5 0 4 0 0 2 0 0 Other Vehicle Hire Charges
1 8 0 8 0 0 4 0 0 Receipts from postal charges

Account Heads - Expenditure

Detailed
Minor Detailed
Major Head Sub- Description
Head Head
Head
2 1 0 2 0 0 4 0 3 Festival Allowance
2 1 0 2 0 0 4 0 4 Cost of Uniforms
2 2 0 1 2 0 3 0 0 Internet Charges
2 2 0 3 0 0 2 0 0 Travelling Expenses - Secretary
2 2 0 3 0 0 3 0 0 Travelling Expenses - Municipal Engineer
2 2 0 3 0 0 4 0 0 Travelling Expenses - Health Officer
2 2 0 3 0 0 5 0 0 Travelling Expenses - Permanent Staff
2 2 0 3 0 0 6 0 0 Travelling Expenses - Temporary Staff
2 2 0 3 0 0 7 0 0 Travelling Expenses - Contingent Staff
2 2 0 3 0 9 9 0 0 Travelling Expense of others

9
 Detailed
Minor Detailed
Major Head Sub- Description
Head Head
Head
2 3 0 2 0 0 2 0 0 Bulk Purchase of Water for Distribution
2 3 0 5 3 0 1 0 0 Repairs - Vehicles
2 3 0 5 3 0 2 0 0 Fuel charges - Vehicles
2 3 0 5 9 0 1 0 0 Repairs & Maintenance - Machinery
2 3 0 5 9 0 2 0 0 Repairs & Maintenance - Furniture
2 3 0 5 9 0 3 0 0 Repairs & Maintenance - Office
Equipments
2 3 0 5 9 9 9 0 0 Repairs & Maintenance - Other Assets
2 3 0 8 0 0 7 0 0 Expenses for Cutting of dangerous trees
2 3 0 8 0 0 8 0 0 Expenses for removal of unauthorized
construction
2 3 0 8 0 0 9 0 0 Expenses for shifting of posts
2 3 0 8 0 1 0 0 0 Expenses related to removal of
encroachments
2 3 0 8 0 9 9 0 0 Others - Operation & Maintenance
Expenses
2 5 0 4 0 2 0 0 0 Development Fund Programmes-Regional
Economic Development
2 5 0 4 0 2 1 0 0 Development Fund Programmes-IT & E-
Governance
2 5 0 4 0 2 2 0 0 Development Fund Programmes-Slum
Improvement
2 5 0 4 0 2 3 0 0 Development Fund Programmes-Welfare
of Women and Children
2 5 0 4 0 2 4 0 0 Development Fund Programmes-Town
Planning

Account Heads - Liabilities

Detailed
Minor Detailed
Major Head Sub- Description
Head Head
Head
3 1 0 1 0 0 3 0 0 Development Authority Fund
Account Heads - Assets

Major Head Minor Detailed Detailed Description

Head Head Sub-
Head
4 1 2 1 0 0 1 0 1 Capital Work in Progress -Development
Fund -Agriculture
4 1 2 1 0 0 1 0 2 Capital Work in Progress -Development

10
 Major Head Minor Detailed Detailed Description
Head Head Sub-
Head
Fund -Animal Husbandry
4 1 2 1 0 0 1 0 3 Capital Work in Progress -Development
Fund - Minor Irrigation
4 1 2 1 0 0 1 0 4 Capital Work in Progress -Development
Fund - Fisheries
4 1 2 1 0 0 1 0 5 Capital Work in Progress -Development
Fund -Social Forestry
4 1 2 1 0 0 1 0 6 Capital Work in Progress -Development
Fund -Small Scale Industry
4 1 2 1 0 0 1 0 7 Capital Work in Progress -Development
Fund -Housing
4 1 2 1 0 0 1 0 8 Capital Work in Progress -Development
Fund -Water Supply
4 1 2 1 0 0 1 0 9 Capital Work in Progress -Development
Fund -Electricity & Energy
4 1 2 1 0 0 1 1 0 Capital Work in Progress -Development
Fund -Education and Culture
4 1 2 1 0 0 1 1 1 Capital Work in Progress -Development
Fund -Public Works
4 1 2 1 0 0 1 1 2 Capital Work in Progress -Development
Fund -Public Health & Sanitation
4 1 2 1 0 0 1 1 3 Capital Work in Progress -Development
Fund -Social Security and Social Welfare
4 1 2 1 0 0 1 1 4 Capital Work in Progress -Development
Fund Eradication of Poverty
4 1 2 1 0 0 1 1 5 Capital Work in Progress -Development
Fund of SCSI
4 1 2 1 0 0 1 1 6 Capital Work in Progress -Development
Fund -Sports & Cultural Affairs
4 1 2 1 0 0 1 1 7 Capital Work in Progress -Development
Fund -Public Distribution
4 1 2 1 0 0 1 1 8 Capital Work in Progress -Development
Fund -Natural Calamity Relief
4 1 2 1 0 0 1 1 9 Capital Work in Progress -Development
Fund -Co-operation
4 1 2 1 0 0 1 2 0 Capital Work in Progress -Development
Fund -Regional Economic Development
4 1 2 1 0 0 1 2 1 Capital Work in Progress -Development
Fund -IT & E-Governance
4 1 2 1 0 0 1 2 2 Capital Work in Progress -Development
Fund -Slum Improvement
4 1 2 1 0 0 1 2 3 Capital Work in Progress -Development
Fund -Welfare of Women and Children

ii
Major Head Minor Detailed Detailed Description
Head Head Sub-
Head
4 1 2 1 0 0 1 2 4 Capital Work in Progress -Development
Fund -Town Planning
4 6 0 1 0 0 7 0 0 Medical Loan to Employees

12
 APPENDIX 3

MODIFICATIONS TO THE CODING STRUCTURE

Account Heads - Income

Detailed
Major Minor Detailed
Sub- Description Modifications
Head Head Head
Head
1 2 0 1 0 0 2 0 0 Basic Taxes & Duties Words "Basic
collected by Others Taxes" have been
added
1 2 0 1 0 9 9 0 0 Others - Taxes & The words "by
Duties Collected by Others" added
Others
1 4 0 5 0 0 1 0 1 Water Connection Detailed Head
Charges changed from "02"
to "01 it
1 4 0 5 0 0 1 0 2 Rent of Meter and Detailed Head
Inspection Charges changed from "03"
to "0 111

1 4 0 5 0 0 2 0 0 Electricity Charges Detailed Head

changed from "04"
to "02"
1 4 0 5 0 0 2 0 1 Electricity Service Detailed Dead
Connection Charges changed from "05"
to "02"
1 4 0 5 0 0 2 0 2 Electricity Detailed Head
Reconnection Charges changed from "05"
to "02"
1 4 0 5 0 0 3 0 0 Cattle Pound Charges Detailed Head
changed from "07"
to "03"
1 4 0 5 0 0 4 0 0 City Ferries Charges Detailed Head
changed from "08"
to "04"

1 4 0 5 0 0 5 0 0 Public Sanitation Detailed Head

Charges changed from "09"
to "05"

1 4 0 5 0 0 6 0 0 Market Fees Detailed Head

changed from "10"
to "06"

1 4 0 5 0 0 7 0 0 Bus Stand Fees Detailed Head

13
 Detailed
Major Minor Detailed
Sub- Description Modifications
Head Head Head
Head
changed from " 1 1 "
to "07"
1 4 0 5 0 0 8 0 0 Slaughter House Fees Detailed Head
changed from "12"
to "08"

1 4 0 5 0 0 9 0 0 Lorry, Taxi, Auto and Detailed Head

Other Vehicle Stand changed from "13"
Fees to "09"
1 4 0 5 0 1 0 0 0 Receipts on account of Detailed Head
cost of services changed from " 14
rendered to "10" and
the word " of' has
been added
1 4 0 5 0 1 1 0 0 Receipts from Detailed Head
Housing Projects changed from "15"
to "11"
1 4 0 5 0 1 2 0 0 Receipts from Detailed Head
Libraries changed from " 16"
to "12"

1 4 0 5 0 1 3 0 0 Receipts from Schools Detailed Head

changed from " 17"
to "13"

1 4 0 5 0 1 4 0 0 Receipts form Detailed Head

Hospitals & changed from "08"
Dispensaries to "14"
1 4 0 5 0 1 5 0 0 Receipts from Detailed Head
Veterinary Poly Clinic changed from "09"
to "15"

Account Heads - Expenditure

Detailed
Major Minor Detailed
Sub- Description Remarks
Head Head Head
Head
2 1 0 2 0 0 4 0 1 Uniforms Allowance "Allowance" added
2 1 0 5 0 0 0 0 0 Other Establishment "Establishment
Expenses Expenses" have
been added
2 1 0 5 0 0 1 0 0 Remuneration to Added "to persons
persons engaged on engaged on daily
daily wages wages"

14
 Detailed
Major Minor Detailed
Sub- Description Remarks
Head Head Head
Head
2 2 0 1 0 0 1 0 0 Rent - Expenses Added "expenses"
2 2 0 1 0 0 1 0 1 Rent of Buildings - Added "expenses"
Expenses
2 2 0 1 0 0 2 0 1 Land Revenue - Added "expenses"
Expenses
2 2 0 1 1 0 2 0 0 Water Charges - Added "expenses"
Expenses
2 5 0 4 0 1 0 0 0 Development Fund "& Culture " added
Programmes -
Education & Culture
2 5 0 4 0 1 3 0 0 Development Fund "Social Security"
Programmes - Social added
Security & Social
Welfare
2 8 0 8 0 0 0 0 0 Other Prior Period Added " Prior
Expenses period"

Account Heads - Liabilities

Detailed
Major Minor Detailed
Sub- Description Remarks
Head Head Head
Head
3 5 0 3 0 9 9 0 0 Other Government "Government Dues "
Dues Payable added
3 5 0 4 0 0 4 0 4 Refund Payable - Rent Detailed Sub-Head
from lease of lands changed from "99" to
"04"
3 5 0 4 0 0 4 9 9 Refund Payable - Other Detailed Sub-Head
rents changed from "05" to
"99"

15
Account Heads - Assets

Major Minor Detailed Detailed Description Remarks

Head Head Head Sub-
Head
4 6 0 1 0 9 9 0 0 Miscellaneous Loans & " to
Advances to employees employees"
added &
detailed head
changed to 99
4 8 0 3 0 0 0 0 0 Others - Miscellaneous "Miscellaneou
Expenditure to be s Expenditure
written off to be written
off"added

16
 APPENDIX 4

VALUATION OF FIXED ASSETS

1. Fixed Asset represents those Assets of the Municipalities which are meant for use
over and extended period. These are assets held for providing services and are not held
for resale in the normal course of operations of the Municipalities. The opening balance
sheet shall reflect the written down value of the fixed assets. The written down value
represents the original cost of acquisition less the accumulated depreciation.

2. The valuation of fixed assets given herein is not as per the guidelines prescribed
under National Municipal Accounts Manual (NMAM). However, we suggest and
encourage the use of actual cost of acquisition for ascertaining the original cost of fixed
asset.

3. The fixed assets can be either movable or immovable depending on their nature. The
following are some of the fixed assets in the balance sheet of an Municipality

➢ Immovable Assets
■ Land
■ Buildings including School Buildings, Hospital Buildings, etc.
■ Shopping Centres
■ Gardens
■ Playgrounds/ Open Grounds
■ Crematorium/ Burial Grounds
■ Staff Quarters
■ Auditoriums
■ Markets
■ Town Halls/ Community Halls
■ Cattle Pounds
■ Public Toilets
■ Workshops/ Garages
■ Stadiums
■ Art Galleries
■ Slaughter Houses
■ Roads, including, Mud Roads, Tar Roads and Concrete Roads

17
 ■ Footpaths
• Bridges
■ Sub-ways
■ Drains (Open & Closed)
■ Culverts
■ Water Pipelines

■ Street Light Posts

➢ Movable Assets
■ Vehicles including Cars, Buses, Jeeps, Ambulances, Motorcycles, etc.
■ Office Equipment including Computers , Printers and Peripherals,
Photocopiers , Air conditioners, etc.
■ Furniture & Fixture including Electric fitting and installations
■ Hospital Equipment
■ Garden Equipment
■ Equipments of the Town Planning Department
■ Equipment used by the Engineering Department
■ Equipment of the Conservancy Department

VALUATION GUIDELINES

Ascertainment of Original Cost

4. Valuation of Assets will be done as per the following order of preference.

➢ If both the cost and date of purchase/ construction is available / ascertainable -

Original cost.

➢ If cost is not available /unascertainable but the date of construction / purchase

is available:

■ If the asset has outlived its estimated useful life , then it will be valued at
Re. 1/-. Estimation of useful life will be done by the Engineers of the
Municipality.

■ For Assets that have not outlived its useful life, valuation shall be done
based on the rates prescribed by PWD for that year . The engineers of the
Municipality shall conduct the exercise of estimation of value and provide

18
 it to the implementation committee. The value so obtained shall be the
cost of asset.
■ In case PWD rates for a particular year are not available, the current
replacement cost based on the recent rates as prescribed above shall be
taken. This will be deflated till the year of construction based on
wholesale price index (index rates are provided in Annexure 1) to arrive at
the original cost.
■ In case of those class of assets for which PWD rates are not prescribed,
current replacement cost will be used. This will be deflated to the year of
construction/ purchase based on wholesale price index (index rates are
provided in Annexure 1) to arrive at the original cost of asset. Current
rates from other manufacturers can be taken e.g. in case of vehicles.
■ In case neither the cost nor the date of purchase/ construction is available,
valuation will be at Re I/- , the same being considered as the residual
value.

5. For fixed assets acquired during 2006-07 and later, the Municipalities shall value
the assets based on the actual cost.

6. The guidelines with regard to ascertainment of cost of acquisition, improvement,

the date of acquisition shall be as given in the "Note on Guidelines to Preparation of
Opening Balance Sheet". The relevant extracts of which are given in Appendix 2.

7. It is suggested that the Municipalities undertake the valuation of the fixed assets
in the following order

➢ All Commercial Buildings like Shopping Complexes, Auditorium, Bus Stands

etc.
➢ Buildings constructed in the last twenty years.
➢ Movable Fixed Assets acquired in the last five years
➢ All other fixed assets including land.

8. The assets related to the Transferred Institutions shall also be included in the
valuation and the same shall be valued at Re. 1.

19
 Depreciation

9. Depreciation shall be charged by Straight Line Method (SLM) on all fixed assets
except land. The rate of depreciation for each type of fixed assets will be based on the
estimated useful life and will be as given in Appendix 21.1 to Chapter 21 - Fixed Assets.
All assets costing less than Rs.5,000 shall be depreciated at 100% in the year of purchase.

10. All assets which have been fully depreciated shall be carried at a Book value of
Re. 1 /-.

11. Depreciation shall be provided at full rates for assets, which are purchased /
constructed before October 1 of an Accounting Year. Depreciation shall be provided at
half the rates for assets, which are purchased / constructed on or after October 1 of an
Accounting Year.

General Principles

12. Land that are acquired free of cost from the government or provided by
individuals or institutions under endowment for specific purposes shall be valued at Re.
1 /-.

13. Where the ownership of the asset has not been transferred in favour of the
Municipality, but the asset is in the permissive possession of the Municipality, it shall be
included in the Fixed Asset Register with Re. 1/- as its value. However there should be a
clear mention in the Register that in case the Government takes back the asset at any
point of time in future, reversal of entry shall be made in the Fixed Asset Register. Cost
of developing such assets, if any, shall be Booked under the respective head of accounts.

14. Statues and Heritage Assets - Statues and valuable works of art shall be charged at
original cost and no depreciation shall be charged thereon.

15. Land pertaining to Parks and Playgrounds including the cost of development of
land shall be Booked under land. Other amenities to Parks and Playgrounds shall be
capitalised as `Parks and Playgrounds'.

16. Any building /structures/ plant and machinery, etc., constructed/ installed in the
Parks and Playgrounds and used for other purposes shall be Booked under the appropriate
heads of account.

17. Land under road shall be classified under land and shall not be included under
Roads.

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18. The valuation report shall contain the methodology adopted for valuation and
shall give justification for each of the item.

19. The valuation report shall be placed before the Council for approval before the
same is incorporated in the opening balance sheet.

ILLUSTRATION

20. The following example illustrates computation of actual cost in various scenarios,
computation of depreciation and arriving at the written down value.

a. Scenario 1 - Where the Actual Cost of Acquisition is available

Actual cost of acquisition refers to the cost paid for acquiring the asset and
any capital expenditure incurred after its acquisition. For example, let us
assume that the construction of a Shopping Complex was completed on 30`x'
June, 1990. The date of capitalization therefore shall be 30`h June 1990. On
verification of the relevant documents and records, it was found that the
total cost of construction was Rs.20,00,000/- and no major improvement
was carried out in the later years.

The depreciation shall be computed as given below

Date of Capitalisation - 30`h June 1990

Cost of Acquisition (A) - Rs.20,00,000/-
Rate of Depreciation (B) - 2%
Depreciation Per Year (C _ (A) x (B) - Rs.40,000/-
Number of Years till March 2007 (D) - 17 Years
Depreciation till March 2007 (E) = (C) x (D) - Rs.6,80,000/-
Written Down Value as on 31st March 2007 - Rs.13,20,000/-
(A) - (E)
b. Scenario 2 - When Actual Cost of Acquisition is not available

Assuming in the above example, the actual cost of acquisition is not

available, the cost of acquisition shall be computed in the following manner.

i. The cost of acquisition shall be done on the basis of PWD rates

prescribed for the year in which the asset is constructed. In the above
example, the rates prescribed for the year 1990 shall be taken as the
basis for computation of cost of asset. The cost so arrived shall be the
cost of acquisition / construction and the depreciation shall be
calculated accordingly.

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 ii. If the PWD rates for 1990 are not available , the next nearest year for
which the rates are available shall be taken . Assuming, in this
situation , the next nearest year for which the rates are available is
1995, the value of asset shall be computed as per 1995 rates and will
then be deflated using the WPI indices given in Annexure I to 1990
rates to arrive at the cost of acquisition. The same is explained below

a. Cost as per 1995 Rates - Rs. 30,00,000/-

b. WPI for 1994-95 - 1778.2

c. WPI for 1990-91 - 1164.4

d. Cost of Asset the shall be computed using the formula -

(Index of the Year in which the asset is Constructed x Cost as

computed for the next nearest year)

Index for the next nearest year for which PWD rates are available

Therefore the cost arrived at as per the method above, in this case,
shall be

1164.40 x 3000000
Cost of Building = = Rs. 19,64,478/-
1778.2
The depreciation shall then be calculated on Rs.19,64,478 / - in the
manner explained above.

iii. If PWD rates are not available for any class of assets, the
current replacement cost of the asset shall be used and shall
be deflated in the manner explained above.

c. If the year of acquisition or construction is not available, the asset shall be

valued at Re. I and no depreciation shall be calculated on that asset.

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 ANNEXUREI

WHOLESALE PRICE INDEX

FINANCIAL YEAR INDEX

1952-53 100.0
1953-54 104.6
1954-55 97.5
1955-56 92.4
1956-57 105.3
1957-58 108.4
1958-59 112.8
1959-60 117.1
1960-61 124.8
1961-62 125.1
1962-63 129.9
1963-64 137.9
1964-65 153.0
1965-66 164.6
1966-67 187.5
1967-68 209.3
1968-69 206.9
1969-70 214.7
1970-71 226.6
1971-72 239.2
1972-73 263.3
1973-74 316.5
1974-75 396.2
1975-76 391.9
1976-77 400.1
1977-78 420.9
1978-79 420.9
1979-80 493.0
1980-81 582.9
1981-82 637.3
1982-83 668.5
1983-84 718.9
1984-85 765.4

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 FINANCIAL YEAR INDEX
1985-86 799.2
1986-87 845.7
1987-88 914.5
1988-89 982.7
1989-90 1056.0
1990-91 1164.4
1991-92 1324.3
1992-93 1457.5
1993-94 1579.2
1994-95 1778.2
1995-96 1920.3
1996-97 2008.8
1997-98 2097.2
1998-99 2222.0
1999-00 2294.6
2000-01 2458.9
2001-02 2547.3
2002-03 2634.2
2003-04 2777.9
2004-05 2957.9
2005-06 3087.4

Note:
a. Base Year 1952 -53 - 100
b. The indices for the years later than 1961-62 were converted using the arithmetic
conversion method. The linking factor and the years are given in the table below.

Years Base Year on which the Linking Factor

indices were computed
1962-63 to 1970 -71 1961 -62 1.251
1971-72 to 1981-82 1970-71 2.265
1982-83 to 1993-94 1981-82 6.373
1994-95 to 2005-06 1993-94 15.792

Source: Office of Economic Advisor, Government of India.

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 APPENDIX 5

Rates of Depreciation

Estimate
S. Description of Details of Assets that are to be Depreciation
d Life (in
No. Assets included Rate
Y
1 Land Parks, Burial Grounds, Play
grounds Roads etc. and any
vacant site on which no
construction available and kept
as vacant site. This includes the
open space donated by the
layout promoters, to the council
by transfer deeds
2 Building-Class I Office Buildings, School 50 2.00%
Civil Structures Buildings, Public conveniences,
(Structure with R.C. Hospitals, Dispensaries, Clinics,
roof) Maternity & Child Welfare
centers, Swimming pool,
Market places, Slaughter
houses, Stadia, Shopping
complexes, Zoo, Bus stand,
Town hall, Community hall,
Lodging Houses, Cinema
theatre, Staff quarters etc.
3 Building-class-II Nutritious meal centers, 15 6.67%
Civil Structures Compound walls
(Structure with roof
other than R.C. or
without roof)
4 Subways and Cause Cause ways, vehicular subways, 15 6.67%
ways pedestrian over bridges
5 Bridges and Bridges and Flyovers 40 2.50%
Flyovers
6 Storm water Drains- Storm water Drains - open 15 6.67%
open Drains & Drains & Culverts
Culverts
7 Heavy Vehicles Lorry, Tractor, Tipper, Bus, etc. 10 10.00%
8 Light Vehicles Jeeps, Cars, Power Tillers, 10 10.00%
Motorcycles, Mini lorry, Auto
rickshaw etc.
9 Other Vehicles Single driven RC, Double 5 20.00%
Driven RC, Cart etc (RC-
Rubbish cart), Bi-cycles, Tri-
cycles

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 Estimate
S. Description of Details of Assets that are to be Depreciation
d Life (in
No. Assets included Rate
ears
10 Furniture, Fixtures, Steel chairs, Steel Tables, 10 10.00%
Office Equipments Wooden chairs, Wooden tables
etc. Steel racks, Wooden racks,
Steel cupboards, Typewriters,
Duplicators, Xerox machines,
Communication Equipments,
Calculators, Air conditioners,
Water coolers, Refrigerators,
Fans, Electrical fittings, Other
Office equipments, Radios,
TVs, Stools, Public address
systems, Wireless equipments,
etc.
11 Plant / Machinery & Road rollers, Bulldozers, 10 10.00%
Equipment Mechanical Sweeper, Pay
(excluding office Loader, Submersible pumps,
equipment) Mixing mortars, other Civil
Engineering equipments,
Medical equipments in
Hospitals, Dispensaries &
Maternity centers, School
equipments public health
equipments, Tower clocks,
electrical equipments including
generators, Motor pumps, other
Plant & Machinery etc.
12 Roads & Pavements 10 10.00%
Concrete (including
barricades)
13 Bituminus road over 3 33.33%
Jhama metal /
Stone metal
14 Road with Jhama 2 50.00%
metal only
15 Roads & Pavements 6 16.67%
black topped
(including
amenities)
16 Roads & Pavements 3 33.33%
asphalt & WBM
17 Roads & Pavements 50 2.00%
concrete, black
topped, sub grade

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 Estimate
S. Description of Details of Assets that are to be Depreciation
d Life (in
No. Assets included Rate
ears)
18 Pavements with 50 2.00%
Brick & Brick
Paved Road
19 Amenities of parks 5 20.00%
and play grounds
20 Light post 10 10.00%
21 Electrical HT & LT 20 5.00%
installation
Transformers,
Cables
22 Electrical Mercury Vapour, Sodium 10 10.00%
Installations Vapour,
Tube Light 3 33.33%
23 Computers Computer Machinery, 5 20.00%
peripherals like printers, mouse
etc.
24 Carts Single & Double Bullock carts 3 33.33%
25 Wheel Barrow 2 50.00%
26 Water Supply pipe M.S/G.I/ C.I/D.I 40 2.50%
line Asbestos / Plastic 10 10.00%
27 Pumps and Motor 10 10.00%
28 Water Reservoir 40 2.50%
29 a) Deep Tubewell 10 10.00%
b) Hand Tubewell 5 20.00%
30 Water Supply 1. Reservoir 33 3.03%
Source and 2. OHT/GLR 33 3.03%
Transmission 3. Ground Water Wells/ Deep 20 5.00%
System bore wells
4. Channels 40 2.50%
5. Conduits 50 2.00%
31 Water Distribution Pipelines
System 1. Upto 200 m.m 40 2.50%
2. Above 200 m.m 60 1.67%
1. M.S Steel Tanks 5 20.00%
2. India Mark II Pumps 5 20.00%
3. Hand Pumps 5 20.00%
4. Public Fountains 5 20.00%
32 Sewerage Sewerage Lines 30 3.33%
Collection &
Transmission
System

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 S. Description of Estimate
Details of Assets that are to be Depreciation
No. d Life (in
Assets included Rate
ears
33 Plant and a) Water Supply 10 10.00%
Machinery 1. Mechanical Filters
2. Filter Beds
3. Head works, Well points
4. Generator of Booster Station
b) Sewerage
1. Pumping Machinery
2. Treatment Plants
34 Laboratory All equipments in the 10 10.00%
Equipments Laboratories maintained for the
Water Supply and Sewerage
system

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