Capital Receipts: 1. C. Current year and previous year D. All the above. Thus recovery of loan by Central govt. Extra Question for Class 12 Economics Government Budget and the Economy myCBSEguide has just released Chapter Wise Extra Question for class 12. 1. In a government budget, the revenue deficit is ₹ 35 crores. All questions and answers from the Economics Solutions Book of Class 12 Commerce Economics Chapter 14 are provided here for you for free. Revenue receipts consist of 1) Tax Revenue and 2) Non-Tax Revenue. Revenue Receipts are recurring in nature because it occurs every month more or less. Revenue Receipts ii. Thus, the Example of Revenue Receipts: Question: subsidy received from the government $10000. Classification of these transactions reflects in the final statements of the company. Difference between Direct Tax and Indirect Tax and Examples. Capital Expenditures 4. Questions given below are important questions and are expected to be asked in Class 12 Economics board exam 2019-20. 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. It is imposed on an individual but is paid by another person either partly or wholly. Government revenue is the means for government expenditure in the same way as production is means for consumption. What is the basis of classifying government expenditure into revenue expenditure and. COMPARISON BETWEEN REVENUE EXPENDITURE AND CAPITAL EXPENDITURE. Receipts and payments account makes no difference between: A. Taxes are instituted on the income that residents of a country receive from employment and entrepreneurial endeavors. This is the basis of classification between the two. 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. On the other hand, fiscal deficit is the difference between the total expenditure and the total receipt of the government. Thus these are current income receipts of the government from all sources. It requires a number of infrastructural, economics and welfare activities. Capital Expenditures 10:27 mins. 10:10 mins. Similarly, funds raised from Post Office deposits, Public Provident Fund, NSS deposits, etc. RBSE Class 12 Economics Chapter 23 Short Answer Type Questions (SA-I) Question 1. Capital receipts are not available for distribution as profits. Hence, the impact and incidence of taxes are on different persons. 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. 5: Only revenue transactions are recorded here. Receipts which are non-recurring (not received again and again) by nature and whose benefit is enjoyed over a long period are called "Capital Receipts", e.g. It states the excess government Revenue Expenditure over Revenue receipts. Solution: Revenue Defici = Revenue Expenditure – Revenue Receipt Revenue Receipts: Amount received from sales of goods, interest received, commission received, discount received, rental income, debt recovered etc. Definition of Capital Expenditure. (Q11) The following figures are based on budget estimates of GOI for the year 2013 - 2014 : (Rs. ANSWERS 1 False. 8. 11 Honororium. 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). Generally, expenditure incurred on normal running of the government departments and maintenance of services is treated as revenue expenditure. Get free NCERT Solutions for Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts Chapter 1 Accounting for Not-for-Profit Organisation solved by experts. Explain the role of government budget in influencing allocation of resources. Examples: Union excise duties and custom duties, https://www.zigya.com/share/RUNFTjEyMDUxMDI1. The income tax burden is equitably distributed on different people and institutions. Class 5 Class 6 Class 7 Class 8 Class 9 Class 10 Class 11 Class 12. The capital receipt is received in exchange for the source of income. Key Difference: The main difference between Revenue and Receipt is that receipt is the cash received and is also known as cash inflow or 'Cash Receipt' meaning cash received by the entity, but it also includes revenue and other loans that it has to repay back.Revenue means the benefits the entity has received or earned by its main business and the earning is it's own and does not need to be paid back. 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. 5. Meaning. If it creates an asset or reduces a liability, it is categorised as capital expenditure. It is imposed on the income of a person based on the principle of ability to pay. Capital Receipts are that amount which is received from non-operational activities i.e. It does not result in creation of assets. In deciding whether a particular receipt is of a capital or revenue type, the following considerations are considered to be immaterial and not going to decide or change the character or nature of the receipt. The major difference between the two is that the Capital expenditure is a one-time investment of money. Hence borrowing in government budget is a fiscal deficit. Capital Receipts. revenue deficit of Government. Answer: it reduces the cost of production of the goods, hence it is revenue received only. The Constitution requires that the budget has to distinguish between receipts and expenditure on revenue account from other expenditure. 7: Its balance is carried over to Receipts & Payments Account of the next year. Revenue receipts are money received by a business as a result of its normal business operations. 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. Capital Receipts and Sources of Capital Receipt. Revenue Receipt: Non - Tax Revenue. [CBSE 2005, 10] Or (B) Repayment of loan to World Bank, foreign government, etc. [1]Surbi, S. Difference Between Capital Expenditure and Revenue Expenditure. The difference between fiscal deficit and primary deficit shows the number of interest payments on the borrowings made in the past. Difference between Revenue Expenditure and Capital Expenditure. It is incurred for normal running of government departments and maintenance. Sandeep Garg Solutions Class 12 – Chapter 10 – Part B. 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. If it creates an asset or reduces a liability, it is categorised as capital expenditure. 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 Components of Budget. Such expenditure is incurred on long period development programmes, real capital assets and financial assets. The difference between the total expenditure of Government by way of revenue, capital and loans net of repayments on the one hand and revenue receipts of Government and capital receipts which are not in the nature of borrowing but which finally accrue to Government on the other, constitutes gross fiscal deficit. assets because it owns money that it lends. In government budget capital receipts are classified in three groups, namely, (i) Borrowings (ii) Recovery of loans, and (iii) Disinvestment and other receipts.Difference. Economics Project on Government Budget is specifically written for cbse students of class 12. NCERT Solutions for Class 12 Macro Economics Chapter-8 Government Budget and the Economy ... .is the difference between total receipts and total expenditure. ANSWER: a. 2. 3.5 / 5 ( 4 votes ) Contents1 INTRODUCTION:2 MEANING:3 OBJECTIVES:4 COMPONENTS OF BUDGET:4.1 Revenue Budget:4.2 Capital Budget:5 BUDGET EXPENDITURE:6 ACKNOWLEDGMENT:7 CERTIFICATE: INTRODUCTION: In the modern world, every go government aims at maximizing the welfare of its country. Borrowing is treated capital receipts because it creates liability of returning loans. ... Class 12. So all receipts in, say consolidated fund, are split into Revenue Budget (revenue account) and Capital Budget (capital account), which includes non-revenue receipts and expenditure. Government receipts which either (i) create liabilities (of returning loans), or (ii) reduce assets (on disinvestment) are called capital receipts. Differences Between Current Account and Capital Account. An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. Tax Revenue: A fund raised through the various taxes is referred to as tax revenue. They can also raise money from the public, such loans are market loans. 22 May 2017. disinvestment of PSUs. All Economics Solutions Solutions for class Class 12 Commerce Economics are prepared by experts and are 100% accurate. Traditionally, all grants given to state governments are treated as revenue expenditure even though some of the grants may be for creation of assets. In a mixed economy, the private producers aim towards profit maximisation, while, the government aims towards welfare maximisation. Prices are affected because the price of the product is inclusive of tax. Capital receipts cannot be utilized for the creation of reserve fund. The money which the Government of India had lent in the past to the states, to the PSUs and to the Union Territories, and to the parties and Governments abroad, when recovered back, are called Capital Receipts. Revenue Receipts are shown on the credit side of the profit and loss account of the company. 7 Whereas when the assets of government are not reduced we get revenue receipts. 10 Capital Receipt. (i) Revenue Expenditure. Revenue receipts The receipts of government which neither create any corresponding liability of the government, nor it create any reduction in assets, are termed as revenue receipts, e.g. Revenue deficit = Revenue expenditures − Revenue receipts. Capital receipts are funds received by a business which are not revenue in nature & lead to an overall increase in the total capital of a company. An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. is also capital expenditure because it reduces liability. On the contrary, revenue expenditure occurs frequently. (ii) Directly producing goods and services:If private sector does not take interest, government can directly undertake the production. 1) Tax Revenue: - A tax is a legal compulsory payment imposed by the government on the people. Non-Tax Revenue: Non-Tax revenue refers to receipts of the government from all sources other than those of tax receipts. Basis of Difference. A decline in the government liabilities and creates assets for the government. (i)    Revenue Receipts. Revenue deficit Revenue deficit= revenue expenditure –revenue receipts. Difference Between Capital Expenditure and Revenue Expenditure A business organisation incurs expenditures for various purposes during its existence. Meaning. Government can influence allocation of resources through:(i) Tax concessions or subsidies:To encourage investment, government can give tax concession, subsidies etc. This is the basis of classification between revenue expenditure and capital expenditure. Ques 1 How are capital receipts different from revenue receipts … The primary difference between Capital Receipts vs Revenue Receipts is that Capital receipts are the receipts of non-recurring nature which either creates the liability of the company or reduces the company’s assets whereas revenue receipts are the receipts of recurring nature and are reported in the statement of income of the company. Fiscal deficit c. Budget deficit d. Primary deficit View Answer / Hide Answer. Free PDF download of Important Questions with Answers for CBSE Class 12 Economics Chapter – Government Budget and the Economy prepared by expert Economics teachers from latest edition of CBSE(NCERT) books only by CoolGyan to score more marks in CBSE … Revenue Receipts are the income gained by the daily operational activities of the business. These are proceeds of taxes, interest and dividends on government investments, cess and other receipts for services rendered by government. Capital Receipts: Money generated from sale of assets, shares, debentures, loan received, investment made by new partner etc. 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. Difference between revenue receipts and capital receipt Report ; Posted by Sidhant Negi 2 years, 9 months ago. ... CBSE Class 12 Economics Solved Question Paper 2016. © 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. Categorisation to Revenue/Capital Receipts — (i) It is capital receipt because it reduces financial assets. Revenue receipts and revenue payments. (iv) This is capital receipt because disinvestment reduces government assets. Difference between Capital Receipts and Revenue Receipts. A capital receipt generally results from financing activities rather than operational activities, but there are many other differences. is central govt. Sources of Income: Taxation is the primary source of income for a government. Revenue deficit b. Differentiate between Revenue Receipts and Capital Receipts. Thereby the tax burden falls more on the rich than on the poor. 6. Revenue Receipts. Interest: Government receives interest on loans given by it to state governments, union … It is incurred for acquisition of capital assets. ... Differentiate between Revenue Receipts and Capital Receipts. 9. Allocation of resources is one of the important objectives of government budget. Revenue Receipts:-Any receipts which do not either create a liability or lead to reduction in assets is called revenue receipts. A receipt journal entry for capital will affect cash and an asset or liability account. 12. (b) investment in shares, loans by central government to state government, foreign governments and government companies, cash in hand, and (c) acquisition of valuables. 4. Download the PDF Question Papers Free for off line practice and view the Solutions online. The money which the Government of India had lent in the past to the states, to the PSUs and to the Union Territories, and to the parties and Governments abroad, when recovered back, are called Capital Receipts. 11:11 mins. Basis of Difference: Capital Receipts. Revenue receipts are the one which affects the profitability of the company like day to day incomes. These are financed out of revenue receipts. A revenue receipts shall be repetative in nature and shall be shown or credited in the profit and loss account. {$11000(Revenue Exp) + $5000 (capital exp)} minus {$10000 (revenue rec) +$5000(NDCR)} = $1000. Tax revenue consists of proceeds of taxes and other duties levied by the Union government such as income tax, corporate tax, excise duty, customs […] Components (Sources) of Revenue Receipts: Revenue receipts of the government are divided into two groups, namely, (i) tax revenue and (ii) non-tax revenue. 12:43 mins. Such expenditure is met out of capital receipts of the government including borrowing from public and foreign governments. For example, expenditure on medicines and salaries of doctors in a hospital for rendering services is revenue expenditure. Two main examples of capital receipts which create liability are (a) Borrowing, and (b) Raising of funds from PPF and Small Saving Deposits. 7 Fund Based. You will also love the ad-free experience on Meritnation’s Economics Solutions Solutions. Capital Receipts ii. Expenditure is basically spending of funds or money to avail services or for purchasing. All Economics Solutions Solutions for class Class 12 Commerce Economics are prepared by experts and are 100% accurate. The main sources of non-tax revenue are: 1. Business receipts are inflow of economic resources mostly in the form of cash and cash equivalents. These do not give rise to debt. ... Capital transactions (c) Autonomous transactions (d) Accommodating transactions. tax receipts of … Government receipts which neither (a) create liabilities, nor(b)    reduce assets are called revenue receipts. CBSE Class 12 Economics Chapter- Government Budget and the Economy Important Questions – Free PDF Download. What is the difference between revenue expenditure and capital expenditure? 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. Examples of debt creating receipts are: Net borrowing by government at home, loans received from foreign governments, borrowing from RBI. 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. To know about the capital expenditures and revenue expenditures, first of all, it is very important to know about the meaning of expenditure beforehand. In such a situation, the government through the budgetary policy, aims to reallocate resources in accordance with the economic (profit maximisation) and social (public welfare) priorities of the country. Revenue Receipts are received in substitution of an income of the company. ... • Difference between capital and revenue reserve ... Capital Receipts; Revenue and Capital Expenditure; After going through this Unit, the students will be able to: • state the meaning of financial statements the . 6 False. In short, when government raises funds either by incrurring a liability or by disposing of assets,it is called a capital receipt. 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. Capital Receipts are the ones which either decreases or increases the value of an asset of the company. money brought into the business by the owner (capital invested), loan from bank, sale proceeds of fixed assets etc. Examples of non-debt capital receipts are: Recovery of loans, proceeds from sale of public enterprises (i.e., disinvestment, etc.). 1. FD= Total Expenditure- (Revenue Receipts+ Non-Debt Creating Capital Receipts) Question 1. Ask questions, doubts, problems and we will help you. Loans raised from debenture-holders and financial institutions etc., 4. Revenue receipts are the regular sources of revenue of the government but the capital receipts are irregular sources of revenue. Distinguish between revenue expenditure and capital expenditure. What is the difference between a capital expenditure and a revenue expenditure? 7:35 mins. 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. Unlike revenue received which is a substitution of income. Capital expenditure generates future economic benefits, but the Revenue expenditure generates benefit for the current year only. Bank Loan, Debenture etc: Revenue Receipts are that amount which is received/earned from operational activities i.e. Capital Receipts are received in exchange of sources of income such as capital goods or assets of the organization. Whether subsidies on diesel is a revenue or capital expenditure. A receipt journal entry for revenue affects cash or accounts receivable and revenue. It is important to correctly differentiate between the two. In accounting and finance, they can be divided into two types – capital receipts and revenue receipts. In this way, revenue receipts affect the profit or loss of a business. Instead of this he enters into an agreement to get a sum of 36,000 in lump sum to serve for a period of t… 2020 Zigya Technology Labs Pvt. The purpose of such expenditure is not to build up any capital asset but to ensure normal functioning of government machinery. Ans. 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. Revenue Receipts are the income gained by the daily operational activities of the business. 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. 6: Its balance can never be credit. This type of expenditure adds to the capital stock of the economy and raises its capacity to produce more in future. assets. to the producers. 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 7. Capital receipts comprise of the loans or capital that are raised by governments by different means. Accounting System at class XI and XII. Let's us take a look. This type of expenditure adds to the capital stock of the economy and raises its capacity to produce more in future. Difference between capital receipts and revenue receipts can be compiled as follows; Capital Receipts 1. Usually the cost is recorded in a balance sheet account that is reported under the heading of Property, Plant and Equipment. The private sector always tend to divert resources towards areas of high profit, while, ignoring areas of social welfare. Difference Between Capital Expenditure and Revenue Expenditure A business organisation incurs expenditures for various purposes during its existence. If revenue receipts are ₹70 crores and capital expenditure ₹120 crores, then how much is the revenue expenditure. Capital receipt is shown on the liabilities side of the Balance Sheet. Capital Receipts. 9 Legacy. Fiscal Deficit ; The fiscal deficit is the difference between the government’s total expenditure (both revenue and capital) and its total receipts excluding borrowings. Capital Receipts are non-recurring in nature because it occurs only one time for an asset in a year. Capital Expenditures 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. But in case of capital receipts which are borrowings, government is under obligation to return the amount alongwith interest. The term “Revenue Receipt” is made up of two words revenue and receipts. (ii) and (iii) are revenue receipts because these create neither liabilities nor cause any reduction in assets. Capital Receipts vs Revenue Receipts There are two types of amounts received by a firm during its regular course of business, Capital Receipts and Revenue Receipts. For example, construction of hospital building is capital expenditure. (i) Revenue Expenditure. Difference between Revenue Expenditure and Capital Expenditure. Definition of Revenues. Revenue budget has two parts: i. The difference between capital expenditure and revenue expenditure are expained in tabular form. Similarly, disinvestment by the govt. An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. 232, Block C-3, Janakpuri, New Delhi, (B) Repayment of loan is also capital expenditure because it reduces liability. Explain the role the government can play through the budget in influencing allocation of resources. These expenditures are met out of capital receipts of the government including capital … All questions and answers from the Economics Solutions Book of Class 12 Commerce Economics Chapter 14 are provided here for you for free. difference between revenue receipts and capital receipts. Description: The most important receipts under this head are interest receipts (received on loans given by the government to states, railways and others) and … Tax burden cannot be shifted to another person. Delhi - 110058. 30. Difference/Distinction between Capital and Revenue Receipts: You will also love the ad-free experience on Meritnation’s Economics Solutions Solutions. A brief explanation of both the types is given below: Capital receipts Capital receipts are business receipts which are not related to […] Revenue Expenditures Capital Budget: it deals with the capital aspect of the government budget and it consists of: i. Difference Between Capital Receipts And Revenue Receipts. Capital Receipts are the income generated from the non-operating sources, which are having a long term effect. The first and foremost difference between the two is, Capital expenditure generates future economic benefits, but the Revenue expenditure generates benefit for the current year only. Chapter 14 are provided here for you for free from public and foreign.... State government ( say up govt. will affect cash and an or...: 1 Thus these are proceeds of taxes are on different persons of tax either a. Company like day to day incomes leads to a reduction in assets is called receipts... 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