Question

Short answer type questions:
Giving reasons, categorise the following into revenue receipts and capital receipts: (i) Recovery of loans; (ii) Corporation tax; (Ili) Dividends on investments made by government; (iv) Sale of a public sector undertaking.

Answer 1

1:Recovery of a loan is a capital receipt because it reduces the assets of the government.

2:Corporation tax is a revenue receipt because revenue receipts are those money receipts that do not create any corresponding liabilities or cause any reduction in the assets of the government.

3:Dividends on investments made by the government is a capital receipt because capital receipts refer to those money receipts which either create a liability for the government or cause a reduction in assets of the government.

4:Sale of a public undertaking is a revenue receipt revenue receipts are those money receipts that do not create any corresponding liabilities or cause any reduction in the assets of the government.