Question

15.state giving reason whether the following statements are true or false.
a. Loans from world bank is a revenue receipt.
b. Construction of school building is a capital expenditure.​

Answer 1

Answer:

(I) False Money borrowed from World Bank at low interest rate creates liability or reduce assets and thus treated as capital receipt. Grants are counted as revenue receipts.

Fiscal deficit, estimated as the difference between total expenditure and total receipts, is often termed as gross fiscal deficit. As there are three sources of borrowing for the government, gross fiscal deficit is also estimated as the sum total of borrowing from RBI, borrowing from abroad and net borrowing at home. Hence, borrowings are equivalent to fiscal deficit and borrowings by a government represents a situation of fiscal deficit.

(2) True , Capital expenditure refers to the estimated expenditure in a fiscal year which creates assets for the government and causes reduction in liabilities for the government. For example: expenditure on lands and building, purchase of shares, expenditure on machinery and equipment. Thus, construction of a school building is a capital expenditure as school building is an asset.