Test: Government Budget And Economy - 2

Capital receipts accrue on realisation of assets which is nothing but source of funds. Further, when we sell any asset it is grouped under non-operating income. But, profit or loss on it would be released to the revenue account which in turn would be transferred to reserves. So, we are unlocking the value of asset i.e. economic benefit on such asset is actually realized. Economic benefit means 'Increase in revenue or decrease in operating cost' which is nothing but revenue in nature. So, it is also the component of government revenue.

The budget is divided into two parts — (i) Revenue Budget, and (ii) Capital Budget.

A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense.

The budget has two broad components: Revenue budget and Capital budget. The revenue budget includes revenue expenditure and revenue receipts. The capital budget includes capital expenditure and capital receipts.

An indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax. The intermediary later files a tax return and forwards the tax proceeds to government with the return.

The government makes agreements on budgetary policy when it takes office. Budgetary policy is determined by the government's expenditures and revenues plans and expected national and international economic developments over the next four years.

Capital receipts are a non-recurring incoming cash flow into your business, which leads to the creation of a liability (a debt to be paid in the future) and a decrease in company assets (resources that lead to capital gain)

Transfer payment. In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income and wealth (payment) made without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output.

Repayment of loan is also capital expenditure because it reduces liability. These expenditures are met out of capital receipts of the government including capital transfers from rest of the world.