Q12) Categorise the following into revenue expenditure and capital expenditure .
Give reasons .
a. Investment in shares .
b. Defence services expenditure.
c. Purchase of cranes for the construction of flyovers.
d. Grant to state government .
e. Subsidies
f. Repayment of loan from IMF .
class 12 (3marks)
Answers
Answer:
d Grant to state government
Answer:
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.