Question

Categorise the following government receipts into revenue and capital receipts .Give reasons.
1.Loan from the World Bank.
2.Income tax received by government
3.Cash grants -in-aid from foreign countries and international organisations.
4.interest received on loans.
5.Receipts from sale of shares in public sector undertakings.

50 points

Answer 1

Answer:

(i) It is capital receipt as it reduces financial assets. (ii) and (iii) are revenue receipts because they create neither liabilities nor assets. (iv) It is capital receipt as disinvestment reduces government assets. (v) It is revenue receipt as it creates neither liability nor assets (vi) Dividend is revenue receipt. (vii) Grants from foreign government are revenue receipts as it does lead to increase or decrease in assets or liabilitites of the government (viii) are revenue receipts (ix) Borrowing is capital receipts as it creates liability.