3 Marks Question

Question

Differentiate between Revenue Budget and Capital Budget.

Vidyadip · Accepted Answer

S.No. Basic Revenue Budget Capital Budget 1. Inclusion Revenue budget includes: 1.Revenue Receipt. 2.Revenue Expenditure. Capital Budget Capital budget includes Capital Receipt. Capital Expenditure. 2. Meaning of types 1. Revenue Receipt: Government receipts that: Neither creates liabilities for the government nor cause any reduction in assets of the government are called revenue receipts. 2. Revenue Expenditure: An expenditure that: Neither creates any assets nor causes any reduction of liability. 1. Capital Receipt: Government receipts that Either creates liabilities (of payment of loan) or reduce assets (on disinvestment) are called capital receipts. 2. Capital Expenditure: Capital expenditure that Either creates assets for the government or causes reduction in liabilities of the government. 3. Examples Examples of revenue receipt are income tax, gift tax, sales tax, fees and penalties etc. Examples of revenue expenditure are old age pensions, salaries and scholarship, expenditure on the repayment of loan, defence, health etc. Examples of Capital receipt are loans by the government, recovery of loans etc. Examples of Capital expenditure, Equity (or Shares) of the domestic or multinational corporations purchased by the government, repayment of loans reduces liability of the government.

S.No.	Basic	Revenue Budget	Capital Budget
1.	Inclusion	Revenue budget includes: 1.Revenue Receipt. 2.Revenue Expenditure.	Capital Budget Capital budget includes Capital Receipt. Capital Expenditure.
2.	Meaning of types	1. Revenue Receipt: Government receipts that: Neither creates liabilities for the government nor cause any reduction in assets of the government are called revenue receipts. 2. Revenue Expenditure: An expenditure that: Neither creates any assets nor causes any reduction of liability.	1. Capital Receipt: Government receipts that Either creates liabilities (of payment of loan) or reduce assets (on disinvestment) are called capital receipts. 2. Capital Expenditure: Capital expenditure that Either creates assets for the government or causes reduction in liabilities of the government.
3.	Examples	Examples of revenue receipt are income tax, gift tax, sales tax, fees and penalties etc. Examples of revenue expenditure are old age pensions, salaries and scholarship, expenditure on the repayment of loan, defence, health etc.	Examples of Capital receipt are loans by the government, recovery of loans etc. Examples of Capital expenditure, Equity (or Shares) of the domestic or multinational corporations purchased by the government, repayment of loans reduces liability of the government.

S. No	Particulars	(₹) In Crose
1.	Rent.	3000
2.	Wages and salaries.	3000
3.	direct tax.	6000
4.	Intermediate consumption by government.	1500
5.	Net Import.	500
6.	Gross domestic capital formation.	7500
7.	Change in stock.	1000
8.	Income paid to abroad.	4000
9.	Current replacement cost.	1000
10.	Distributed profit.	1200
11.	Personal disposable income.	12000
12.	Interest.	7000
13	Household saving.	2000
14.	Subsidies.	1000
15.	Export.	1500
16.	Sale of goods and services by government.	500
17.	Income from entrepreneurship.	3000
18.	Wages and salaries by the government.	3000

Output (Units)	1	2	3
Average Cost (₹)	160	96	80

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