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Questions
Distinguish between revenue expenditure and capital expenditure in Government budget. Give an example of each.
What is the difference between revenue expenditure and capital expenditure?
Solution
| Basis of Difference | Capital Expenditure | Revenue Expenditure |
| 1. Meaning | A decline in the government liabilities and creates assets for the government. | No decline in government liabilities and does not create assets for the government. |
| 2. Examples | Purchase of shares and bonds | Salaries, pensions and interest payments |
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| S. No. | Content | Rs (in crores) |
| 1. | Revenue Expenditure | 100 |
| 2. | Capital Receipts | 40 |
| 3. | Net Borrowings | 38 |
| 4. | Net Interest Payments | 27 |
| 5. | Tax Revenue | 50 |
| 6. | Non-tax Revenue | 15 |
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| S. No. | Content | Rs (in crores) |
| 1. | Revenue Expenditure | 100 |
| 2. | Capital Receipts | 40 |
| 3. | Net Borrowings | 38 |
| 4. | Net Interest Payments | 27 |
| 5. | Tax Revenue | 50 |
| 6. | Non-tax Revenue | 15 |
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| S. No. | Content | Rs (in crores) |
| 1. | Revenue Expenditure | 100 |
| 2. | Capital Receipts | 40 |
| 3. | Net Borrowings | 38 |
| 4. | Net Interest Payments | 27 |
| 5. | Tax Revenue | 50 |
| 6. | Non-tax Revenue | 15 |
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National Income = Rs 1,000
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Identify the correctly matched pair of the items in Column A to those in Column B:
| Column A | Column B |
| 1. Revenue Expenditure | (a) Does not cause any reduction in government liability |
| 2. Capital Expenditure | (b) Which creates corresponding liability for the government |
| 3. Revenue Receipts | (c) Which causes a reduction in assets of the government |
| 4. capital Receipts | (d) Causes reduction in government liability. |
