Question

Identify the following as revenue expenditure and capital expenditure. Give reasons.
(i) Salary paid to Army officers.
(ii) Purchase of Metro coaches from Japan.
(iii) Repayment of Loan taken from World Bank.
(iv) Grants given by central government to state Government.
(v) Loan given to Union Territories.
(vi) Interest paid on National Debt
(vii) Expenditure on construction of Metro. (viii) Pension paid to retired Government employees.
(ix) 10% shares purchased by the Government in a private company.

Answer 1

(i) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the government.
(ii) It is a capital expenditure as it increases asset of the government.
(iii) It is a capital expenditure as it reduces the liability of the government
(iv) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the government
(v) It is a capital expenditure as it increases asset of the government.
(vi) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the government.
(vii) It is a capital expenditure as it increases asset of the government.
(viii) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the government.
(ix) It is a capital expenditure as it increases asset of the government.