Question

Read the following statements -Assertion (A) and Reason(R), choose one of the correct answer from the following:
Assertion (A): Recovery of debt is a capital receipt for the government.
Reason (R): Capital receipts refer to those receipts “which either create liability or reduce assets” of the government.

[1 mark]

• A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct Explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct Explanation of Assertion (A).
• C. Assertion (A) is true but Reason (R) is false.
• D. Assertion (A) is false but Reason (R) is true.

Answer 1

The correct option is A Both Assertion (A) and Reason (R) are true and Reason (R) is the correct Explanation of Assertion (A).

Government grants various loans to state governments or union territories. These loans are assets for the government. Recovery of such loans is a capital receipt as it reduces the assets of the government.