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How would you distinguish between the revenue and capital receipts of the government?
- Revenue receipts are non-redeemable unlike certain capital receipts.
- Capital receipts are always debt creating unlike revenue receipts.
Which of the above statements is/are incorrect?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
How would you distinguish between the revenue and capital receipts of ...
- The main difference between revenue receipts and capital receipts is that in the case of revenue receipts, government is under no future obligation to return the amount, i.e., they are non-redeemable. But In case of capital receipts which are borrowings, government is under obligation to return the amount along with Interest.
- Capital receipts may be debt creating or non-debt creating.
- Examples of debt creating receipts are—Net borrowing by government at home, loans received from foreign governments, borrowing from RBI. Examples of non-debt capital receipts are—Recovery of loans, proceeds from sale of public enterprises (i.e., disinvestment), etc. These do not give rise to debt.
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Community Answer
How would you distinguish between the revenue and capital receipts of ...
Explanation:
The correct answer is option 'B' - 2 only. Let's understand why:
Distinguishing between revenue and capital receipts:
Revenue Receipts:
- Revenue receipts are the income received by the government through its regular activities.
- These receipts do not create any liability or obligation for the government.
- Revenue receipts are used for meeting the day-to-day expenses of the government, such as salaries, pensions, subsidies, etc.
- Examples of revenue receipts include tax revenue, non-tax revenue, grants-in-aid, interest receipts, dividends, etc.
Capital Receipts:
- Capital receipts are the income received by the government through the sale of capital assets or by taking loans.
- These receipts create a liability or obligation for the government as they involve repayment or redemption in the future.
- Capital receipts are used for financing the development and capital expenditure of the government.
- Examples of capital receipts include loans raised by the government, disinvestment proceeds, borrowings from external sources, recovery of loans, etc.
Incorrect Statements:
1) Revenue receipts are non-redeemable unlike certain capital receipts.
This statement is incorrect. Revenue receipts are non-redeemable as they do not create any liability for the government. On the other hand, certain capital receipts like loans raised by the government are redeemable and need to be repaid in the future.
2) Capital receipts are always debt creating unlike revenue receipts.
This statement is incorrect. While it is true that capital receipts like loans raised by the government create a debt obligation for the government, not all capital receipts are debt creating. Disinvestment proceeds, for example, are a type of capital receipt that does not create any debt as it involves the sale of government assets.
Therefore, the correct answer is option 'B' - 2 only.
The correct answer is option 'B' - 2 only. Let's understand why:
Distinguishing between revenue and capital receipts:
Revenue Receipts:
- Revenue receipts are the income received by the government through its regular activities.
- These receipts do not create any liability or obligation for the government.
- Revenue receipts are used for meeting the day-to-day expenses of the government, such as salaries, pensions, subsidies, etc.
- Examples of revenue receipts include tax revenue, non-tax revenue, grants-in-aid, interest receipts, dividends, etc.
Capital Receipts:
- Capital receipts are the income received by the government through the sale of capital assets or by taking loans.
- These receipts create a liability or obligation for the government as they involve repayment or redemption in the future.
- Capital receipts are used for financing the development and capital expenditure of the government.
- Examples of capital receipts include loans raised by the government, disinvestment proceeds, borrowings from external sources, recovery of loans, etc.
Incorrect Statements:
1) Revenue receipts are non-redeemable unlike certain capital receipts.
This statement is incorrect. Revenue receipts are non-redeemable as they do not create any liability for the government. On the other hand, certain capital receipts like loans raised by the government are redeemable and need to be repaid in the future.
2) Capital receipts are always debt creating unlike revenue receipts.
This statement is incorrect. While it is true that capital receipts like loans raised by the government create a debt obligation for the government, not all capital receipts are debt creating. Disinvestment proceeds, for example, are a type of capital receipt that does not create any debt as it involves the sale of government assets.
Therefore, the correct answer is option 'B' - 2 only.
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How would you distinguish between the revenue and capital receipts of the government? Revenue receipts are non-redeemable unlike certain capital receipts. Capital receipts are always debt creating unlike revenue receipts.Which of the above statements is/are incorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer?
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