Question

Borrowings is a capital receipt because ________________.

• A. It creates a liability
• B. it creates an asset
• C. It reduces a liability
• D. All of the above

Answer 1

The correct option is A It creates a liability

Capital receipts refer to those money receipts which creates a liability for the government or cause reduction in assets of the government. Therefore, borrowing is a capital receipt as it creates a liability for the government.