Question

Short answer type questions:
Giving reasons, categorise the following into revenue expenditure and capital expenditure: (i) Subsidies; (ii) Grants given to State Governments; (iii) Repayment of loans; (iv) Construction of school buildings.

Answer 1

Subsidies is a revenue expenditure as revenue expenditure refers to the estimated expenditure in a fiscal year which does not create assets for the government or reduction in liabilities.

Grants given to the state government is a revenue expenditure as it does not cause any reduction in the assets and we know, revenue expenditure refers to the estimated expenditure in a fiscal year which does not create assets for the government or reduction in liabilities.

Repayment of loans is a capital expenditure as it causes reduction in liabilities of the government.

Construction of school buildings is not a revenue expenditure because revenue expenditure refers to the estimated expenditure in a fiscal year which does not create assets for the government or cause reduction in liabilities for the government.