One of the other two components of government Revenue in the budget area)Expenditure receiptsb)Revenue Expenditurec)Capital receiptsd)Budget receiptsCorrect answer is option 'C'. Can you explain this answer?

Question

Answer

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.

Answer

Capital receipts r one kind of revenue for govt  as ...these create liability on govt. and also decrease in assets of the govt. .For eg. - revenue by taking loan, revenue by disinvestment, etc.

Answer

Capital Receipts in Government Revenue

Capital receipts are one of the components of government revenue in the budget. These receipts represent the government's inflows of funds that are not generated from regular revenue sources like taxes and fees. Instead, capital receipts are derived from sources that involve the creation of assets or the reduction of liabilities. These receipts are essentially non-recurring in nature and are utilized for long-term investment purposes.

Types of Capital Receipts

There are various types of capital receipts that contribute to government revenue. Some of the significant ones include:

1. Borrowings: Governments often borrow funds from both domestic and international sources to finance infrastructure projects, development programs, or other long-term expenditures. These borrowings can be in the form of loans or bonds, which are repaid over an extended period.

2. Disinvestment: Disinvestment refers to the sale of government-owned assets, such as shares in public sector enterprises or privatization of state-owned companies. The revenue generated from such disinvestments is considered a capital receipt.

3. Recovery of Loans: When the government provides loans to various entities, such as state governments or public sector undertakings, the repayment of these loans is considered a capital receipt.

4. Grants and Aids: Capital receipts also include grants and aids received by the government from foreign countries, international organizations, or other governments. These funds are often provided for specific developmental projects or to support the country's economic growth.

Utilization of Capital Receipts

Capital receipts are primarily used for capital expenditures, which involve the creation of assets or reduction of liabilities. These expenditures are aimed at long-term development, infrastructure improvement, and investment in various sectors of the economy. Some common areas where capital receipts are utilized include:

- Construction of new infrastructure projects such as roads, bridges, airports, and ports.
- Upgradation of existing infrastructure to enhance efficiency and capacity.
- Investment in social sectors like education, healthcare, and housing.
- Support for industrial development and promotion of entrepreneurship.
- Financing research and development activities.

Importance of Capital Receipts

Capital receipts play a crucial role in the government's budget as they provide the necessary funds for long-term investment and development. By utilizing these receipts, the government can support economic growth, improve infrastructure, and enhance the overall standard of living. Furthermore, capital receipts help in reducing the burden on regular revenue sources and promote sustainable development in the country.

Overall, capital receipts are a significant component of government revenue in the budget, enabling the government to finance long-term investments and promote economic development.

Similar Commerce Doubts

One of the other two components of government expenditure in the budget are

One of the two components of government Revenue in the budget are

One of the two components of government expenditure in the budget are

One of the two components of Capital budget are

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