Question

Q. Consider the following statements:

Which of the statements given above is/are correct?

• A.
  1 only
• B.
  2 only
• C.
  Both 1 and 2
• D.
  Neither 1 nor 2

Answer 1

The correct option is A

1 only
Explanation:

Statement 1 is correct: Government receipts which neither (i) create liabilities nor (ii) reduce assets are called revenue receipts. They are proceeds from taxes, interest and dividend on govt. investments, cess and other receipts for services provided by the govt. These are recurring incomes.

Statement 2 is incorrect: Capital receipts refer to those receipts which either create a liability or cause a reduction in the assets of the government. They are non-recurring and non-routine in nature. Capital receipts may be debt creating or non-debt creating. Examples of debt creating receipts can be:

• Net borrowing by government at home
• Loans received from foreign governments
• Borrowing from RBI.

Non debt creating:

• Recovery of loans,
• Proceeds from sale of public enterprises (i.e., disinvestment), etc