Question

Distinguish between revenue expenditure and capital expenditure.

Answer 1

Capital expenditure refers to the expenditure that either creates an asset or reduces the liability of the government.Capital expenditure is also classified as plan and non-plan in the budget documents. A plan capital expenditure, like its revenue equivalent, is associated with central plan and central assistance for state and union territory plans. A non-plan capital expenditure covers different general, social, and economic services furnished by the government.

Revenue expenditure refers to the expenditure that neither creates assets nor reduces the liability of the government. Revenue expenditures are the expenditures incurred for the basis other than the creation of physical or financial assets of the central government. These are associated with the expenses incurred for the normal operations of the government divisions and various services, interest payments on debt sustained by the government, and grants given to state governments and other parties (even though some of the endowments might be meant for the creation of assets).