232, Block C-3, Janakpuri, New Delhi, It is generally a long-period expenditure. It states the excess government Revenue Expenditure over Revenue receipts. Explain the role of government budget in influencing allocation of resources. May 30,2020 - What is capital receipts and revenue receipts ? Examples: Union excise duties and custom duties, https://www.zigya.com/share/RUNFTjEyMDUxMDI1. Meaning. In a government budget, the revenue deficit is ₹ 35 crores. Revenue Receipts are recurring in nature because it occurs every month more or less. Loans raised from debenture-holders and financial institutions etc., 4. Ask questions, doubts, problems and we will help you. Difference between Capital Receipts and Revenue Receipts. Revenue deficit b. Examples of non-debt capital receipts are: Recovery of loans, proceeds from sale of public enterprises (i.e., disinvestment, etc.). 1. 1. Distinguish between revenue expenditure and capital expenditure. In accounting and finance, they can be divided into two types – capital receipts and revenue receipts. Generally, expenditure incurred on normal running of the government departments and maintenance of services is treated as revenue expenditure. Capital expenditure generates future economic benefits, but the Revenue expenditure generates benefit for the current year only. Government receipts are divided into two groups — Revenue Receipts and Capital Receipts.Basis of classification—All government receipts which either create liability or reduce assets of the government are treated as capital receipts whereas receipts which neither create liability nor reduce assets of the government are called revenue receipts. [CBSE 2005, 10] Or 1 January 2018. Primary deficit is the difference between fiscal deficit and interest payment. Difference between Revenue Expenditure and Capital Expenditure. Capital Receipts are received in exchange of sources of income such as capital goods or assets of the organization. Budget Receipts refer to the estimated money receipts of the government from all sources during a given fiscal year. It is incurred for acquisition of capital assets. Fiscal deficit c. Budget deficit d. Primary deficit View Answer / Hide Answer. 7. Thus, the term “receipts” includes sources of public income which are excluded from “revenue.” In a modern welfare state, public revenue is of two types, tax revenue and non-tax revenue. They can also raise money from the public, such loans are market loans. Definition of Revenues. Interest: Government receives interest on loans given by it to state governments, union … tax receipts of … 2. Definition of Capital Expenditure. The main difference between revenue receipts and capital receipts is that in case of revenue receipts, government is under no future obligation to return the amount, i.e., they are non-redeemable. What is the difference between revenue expenditure and capital expenditure? 12:43 mins. Thus these are current income receipts of the government from all sources. These refer to those government receipts that neither create any liability nor they create any reduction in the government assets. 7 (ii) Directly producing goods and services:If private sector does not take interest, government can directly undertake the production. CBSE Class 12 Economics Chapter- Government Budget and the Economy Important Questions – Free PDF Download. | EduRev Commerce Question is disucussed on EduRev Study Group by 165 Commerce Students. Sources of Income: Taxation is the primary source of income for a government. This is the basis of classification between the two. The Constitution requires that the budget has to distinguish between receipts and expenditure on revenue account from other expenditure. Bank Loan, Debenture etc: Revenue Receipts are that amount which is received/earned from operational activities i.e. Capital Expenditures Capital Receipts are non-recurring in nature because it occurs only one time for an asset in a year. Revenue Receipts are the income gained by the daily operational activities of the business. Hence borrowing in government budget is a fiscal deficit. What is the difference between a capital expenditure and a revenue expenditure? assets. It is a short period expenditure and recurring in nature which is incurred every year (as against capital expenditure which is long period expenditure and non-recurring in nature). Difference. All Economics Solutions Solutions for class Class 12 Commerce Economics are prepared by experts and are 100% accurate. Difference between Revenue Expenditure and Capital Expenditure. Capital Receipts: Money generated from sale of assets, shares, debentures, loan received, investment made by new partner etc. If revenue receipts are ₹70 crores and capital expenditure ₹120 crores, then how much is the revenue expenditure. Accounting System at class XI and XII. How? disinvestment of PSUs. What is a capital expenditure versus a revenue expenditure? If it creates an asset or reduces a liability, it is categorised as capital expenditure. (ii) and (iii) are revenue receipts because these create neither liabilities nor cause any reduction in assets. Solution: Revenue Defici = Revenue Expenditure – Revenue Receipt Difference between revenue receipts and capital receipt. Capital Receipts ii. 9 Legacy. In short, when government raises funds either by incrurring a liability or by disposing of assets,it is called a capital receipt. Capital receipt and revenue receipt, both are the very important components of accounting. Capital receipts cannot be utilized for the creation of reserve fund. 5: Only revenue transactions are recorded here. A receipt journal entry for revenue affects cash or accounts receivable and revenue. On the contrary, revenue expenditure occurs frequently. It does not result in creation of assets. It is imposed on an individual but is paid by another person either partly or wholly. Receipt in lump sum or in Instalments.Whether any income is received in lump sum or in instalments, it will not make any difference as regards its nature, e.g., an employee is to get a salary of 1,000 p.m. It requires a number of infrastructural, economics and welfare activities. The capital receipt is received in exchange for the source of income. Ques 1 How are capital receipts different from revenue receipts … Let's us take a look. Capital Receipts are the ones which either decreases or increases the value of an asset of the company. ... CBSE Class 12 Economics Solved Question Paper 2016. Question 1. A revenue receipts shall be repetative in nature and shall be shown or credited in the profit and loss account. C. Current year and previous year D. All the above. assets because it owns money that it lends. Revenue receipts consist of 1) Tax Revenue and 2) Non-Tax Revenue. Any income that does not generate a liability is revenue.For example, if the Government borrows money from World Bank, it will increase its liabilities (because this money has to be paid back)- so cannot be called revenue. 7: Its balance is carried over to Receipts & Payments Account of the next year. Revenue Receipt: Non - Tax Revenue. 6. It is incurred for normal running of government departments and maintenance. Two main examples of capital receipts which create liability are (a) Borrowing, and (b) Raising of funds from PPF and Small Saving Deposits. (ii)    Capital Receipts. Components (Sources) of Revenue Receipts: Revenue receipts of the government are divided into two groups, namely, (i) tax revenue and (ii) non-tax revenue. An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. 6: Its balance may be either debit or credit. (i) Revenue Expenditure. Difference Between Capital Expenditure and Revenue Expenditure A business organisation incurs expenditures for various purposes during its existence. Difference Between Capital Expenditure and Revenue Expenditure A business organisation incurs expenditures for various purposes during its existence. (Q11) The following figures are based on budget estimates of GOI for the year 2013 - 2014 : (Rs. This type of expenditure adds to the capital stock of the economy and raises its capacity to produce more in future. Explain how taxes and government expenditure can be used to influence. Capital Receipts. Tax revenue consists of proceeds of taxes and other duties levied by the Union government such as income tax, corporate tax, excise duty, customs […] To know about the capital expenditures and revenue expenditures, first of all, it is very important to know about the meaning of expenditure beforehand. ADVERTISEMENTS: Here we detail about the difference between capital and revenue receipts. Capital Receipts are shown in the balance sheet and affect the balance sheet by either appearing on the credit side or by the reduction in the value of some asset. Capital receipts The receipts which create corresponding liability for the government or lead to reduction in assets of the government are termed as capital receipts, e.g. Receipts and payments account makes no difference between: A. All Economics Solutions Solutions for class Class 12 Commerce Economics are prepared by experts and are 100% accurate. This is the basis of classification between revenue expenditure and capital expenditure. 4 False. Traditionally, all grants given to state governments are treated as revenue expenditure even though some of the grants may be for creation of assets. Thus recovery of loan by Central govt. Few common examples are receipts from sale of goods and services, discount received from creditors or suppliers, interests earned, dividends received, rent received, commission received, bad-debts recovered, income from other sources, etc. For example, expenditure on medicines and salaries of doctors in a hospital for rendering services is revenue expenditure. "Acquaint with Economics" 09451927636 - Skype Classes for Class XII - transmission Center Kendriya Vidyalaya, Vidisha ( Bhopal Region ) The main difference between revenue receipts and capital receipts is that in case of revenue receipts, government is under no future obligation to return the amount, i.e., they are non-redeemable. Ltd. Download books and chapters from book store. 2 True 3 True. are also treated as capital receipts because government has to repay these amounts.Two main examples which reduce assets are (a) Recovery of loan, and (b) Disinvestment. Available here are Chapter 1 - Accounting for Not-for-Profit Organisation Exercises Questions with Solutions and detail explanation for your practice before the examination ADVERTISEMENTS: Difference Components of Revenue and Capital Receipts! An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. Capital Receipts: 1. Components of Budget. But in case of capital receipts which are borrowings, government is under obligation to return the amount alongwith interest. A revenue receipt does not reduce the liability of the government and it does not add to assets of the government. Capital Receipts are that amount which is received from non-operational activities i.e. in the form of selling whole or part of its shares of public sector enterprises to private enterprises is treated capital receipt because it reduces govt. Government receipts which either (i) create liabilities (of returning loans), or (ii) reduce assets (on disinvestment) are called capital receipts. The main difference between revenue receipts and capital receipts is that revenue receipts are recurring in nature, which the government can expect to receive year after year, whereas capital receipts are a kind of one-time income. Capital receipts comprise of the loans or capital that are raised by governments by different means. Capital Receipts and Sources of Capital Receipt. Here, please note that Loan recovery is Capital Receipt but the interest received on these loans is revenue receipts. Capital Receipts appears on the liabilities side of the Balance Sheet whereas Revenue Receipts appears on the credit side of the Profit and Loss Account as income for the financial year. (iv) This is capital receipt because disinvestment reduces government assets. In a mixed economy, the private producers aim towards profit maximisation, while, the government aims towards welfare maximisation. Examples of revenue expenditure are salaries of government employees, interest payment on loans taken by the government, pensions, subsidies, grants, rural development, education and health services, etc. money brought into the business by the owner (capital invested), loan from bank, sale proceeds of fixed assets etc. Revenue budget has two parts: i. A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset such as equipment or buildings. Capital Expenditures Revenue receipts and revenue payments. … 7 Fund Based. Tax Revenue: A fund raised through the various taxes is referred to as tax revenue. Download the PDF Question Papers Free for off line practice and view the Solutions online. Explain the role the government can play through the budget in influencing allocation of resources. Detailed answer for question - DIFFERENCE BETWEEN CAPITAL RECEIPTS AND REVENUE RECEIPTS posted under taxation, Income Tax posted by Uma FOR INDIA'S BEST CA CS CMA VIDEO CLASSES CALL 9980100288 OR VISIT HERE Economics Project on Government Budget is specifically written for cbse students of class 12. Revenue deficit is the difference between government’s revenue expenditures and government’s receipts. Revenue Receipts are shown on the credit side of the profit and loss account of the company. Such expenditure is met out of capital receipts of the government including borrowing from public and foreign governments. 2020 Zigya Technology Labs Pvt. Basis of Difference: Capital Receipts. An expenditure which either creates an asset (e.g., School building) or reduces a liability (e.g., repayment of loan) is called capital expenditure. All rights reserved, Difference between Capital Expenditure and Revenue Expenditure, Difference between Debit cards and Credit cards. ANSWER: a. Revenue Receipts. 10 Capital Receipt. Capital receipts may be debt creating or non-debt creating. You will also love the ad-free experience on Meritnation’s Economics Solutions Solutions. Some of these expenditures are meant to bring in more profits for the organisation in the long term while some expenditures are for the short term. The difference between revenue expenditure and revenue receipts is a. Balance Sheet and the Final Accounts reflect a fair view of the financial statement of the business only when capital expenditure and revenue expenditure correctly represented. Similarly, funds raised from Post Office deposits, Public Provident Fund, NSS deposits, etc. Current account is the financial account of the economy or any individual entity which shows results of various revenue income and expenditure and calculates revenue profits while capital account indicates various capital income and expenditure like purchase and sale of fixed asset, capital repairs, sale of investments etc (i)    Revenue Receipts. Capital Receipts are the income obtained from the capital assets of the organization. Transactions—both capital and revenue-are recorded here. Non-Tax Revenue: Non-Tax revenue refers to receipts of the government from all sources other than those of tax receipts. Government receipts which neither (a) create liabilities, nor(b)    reduce assets are called revenue receipts. Prices are affected because the price of the product is inclusive of tax. ... Capital transactions (c) Autonomous transactions (d) Accommodating transactions. Revenue Receipts are received in substitution of an income of the company. 4. The major difference between the two is that the Capital expenditure is a one-time investment of money. is treated as capital receipt. If UP government repays say र 20 crores to Central govt., it means reduction in assets of Central govt, to the time of र 20 crores. Define tax. But in case of capital receipts which are borrowings, government is under obligation to return the amount alongwith interest.Debt creating and non-debt creating capital receipts. Allocation of resources is one of the important objectives of government budget. Revenue Receipts. Questions given below are important questions and are expected to be asked in Class 12 Economics board exam 2019-20. Revenue deficit Revenue deficit= revenue expenditure –revenue receipts. difference between revenue receipts and capital receipts. to the producers. 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