Electricity companies in India don't prepare accounts the way a regular company does. They follow the Double Account System — a special format prescribed under the Electricity (Supply) Annual Accounts Rules, 1985 (framed under the Electricity Act). Why? Because these companies have enormous fixed-asset investments — transformers, lines, plant — and regulators need to clearly track how capital was raised and deployed, separate from day-to-day operations.
Instead of one Balance Sheet + P&L, an electricity company prepares four statements: (1) Capital Account — shows sources of long-term capital (shares, debentures, loans) on one side and capital expenditure on fixed assets on the other. It answers: where did the money come from, and what fixed assets did it buy? (2) Revenue Account — the operational P&L. Credits include sale of electricity, meter rents, and miscellaneous receipts. Debits include fuel costs, salaries, repairs, and depreciation. The net surplus transfers to the Net Revenue Account. (3) Net Revenue Account — the appropriation account. Surplus from Revenue Account flows in; dividends, transfers to reserves, and balance carried forward flow out. (4) General Balance Sheet — crucially, this does not include fixed assets (those sit in the Capital Account). It shows current assets, current liabilities, investments, and the net balance figure from the Capital Account.
Two special reserves are exam favourites. The Tariff and Dividend Control Reserve (TDCR) is created when a company earns above the permitted rate of return — the regulator may direct it to be passed back to consumers or used to stabilise tariffs. The Contingencies Reserve is a mandatory reserve of 0.25%–0.5% of original cost of fixed assets annually, invested in specified government securities, to cover unforeseen capital expenditure. Depreciation was traditionally provided using the Sinking Fund Method (building a replacement fund over the asset's life), but companies incorporated under the Companies Act, 2013 now follow Schedule II SLM/WDV rates. This topic carries 8–12 marks in Paper 1, typically requiring preparation of the Revenue Account, Net Revenue Account, or a conceptual explanation of the Double Account System.