Question

Give reason of Explain the statement
1. Income collected from tax is a main source of government revenue.
2. Revenue receipts and Revenue expenditure is known as Revenue Budget.
3. Government revenue is more than government expenditure.

Answer 1

1. Income collected from taxes forms a main part of the government revenue as a tax is a legally compulsory monetary contribution to the government by different economic units, such as households, firms and other economic units. Taxes are imposed by the government on different activities like income, property, production, occupation etc.

2. Revenue budget consists of items which neither lead to a change in the assets nor changes the liabilities of the government. In other words, it consists of the revenue receipts and revenue expenditure, as they do not change either the liabilities or the assets of the government.

3. When government revenue is more than its expenditure, it is called a surplus budget. In other words, it refers to the excess of government revenue over its expenditure. That is,
Surplus budget = Government revenue – Government expenditure