Comment on the following statements as true or false, with a reason.

(i) Construction of school-building is a revenue expenditure of the government.

(ii) Gift tax is a capital receipt.

(iii) Dividends on investment made by government is a revenue receipt.

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Solution

(i) It is a false statement. Construction of school-building is a capital expenditure because it creates an asset for the government.

(ii) It is a false statement. Gift tax is a revenue receipt, because it neither creates liability nor leads to reduction in assets of the government.

(iii) It is a true statement. Dividends on investment made by government is a revenue receipt, as it does not add to liability or reduction in assets of the government.

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Similar questions

Categorise the following government receipts into revenue and capital receipts. Give reasons for your answer.

(i) Receipt from sale of shares of a public sector undertaking.

(ii) Borrowing from public.

(iii) Profit of public sector undertakings.

(iv) Income tax received by government.

List-I	List-II
I. Carriage charges a new machine purchased for factory	(a) Revenue receipt
II. Legal expenses incurred in defending a case of violation of a provision of Factories Act	(b) Revenue expenditure
III. Grant-in-aid received from the Government for the construction of a building	(c) Deferred revenue expenditure
IV. Amount received for a part of the office building sublet	(d) Capital expenditure
	(e) Capital receipt

From the following data about a government budget, find (a) revenue deficit, (b) fiscal deficit, and (c) primary deficit:

Items (Rs in lakh)

(i) Tax revenue 50

(ii) Revenue expenditure 110

(iii) Capital expenditure 210

(iv) Non-tax revenue 30

(v) Capital receipts net of borrowing 140

(vi) Interest payments 20

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