Ask questions, doubts, problems and we will help you. Such expenditure is incurred on long period development programmes, real capital assets and financial assets. Key Differences Between Capital and Revenue Expenditure. Revenue Expenditures Capital Budget: it deals with the capital aspect of the government budget and it consists of: i. 10 Capital Receipt. (i) Revenue Expenditure. Revenue Expenditure and Capital Expenditure of India! 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. An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. Revenue Receipts are received in substitution of an income of the company. is treated as capital receipt. This type of expenditure adds to the capital stock of the economy and raises its capacity to produce more in future. 6: Its balance can never be credit. 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. Meaning. 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. Question 1. (b) investment in shares, loans by central government to state government, foreign governments and government companies, cash in hand, and (c) acquisition of valuables. It is important to correctly differentiate between the two. 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… 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. Such expenditure is met out of capital receipts of the government including borrowing from public and foreign governments. 22 May 2017. This type of expenditure adds to the capital stock of the economy and raises its capacity to produce more in future. A decline in the government liabilities and creates assets for the government. Similarly, funds raised from Post Office deposits, Public Provident Fund, NSS deposits, etc. Non-Tax Revenue is the recurring income earned by the government from sources other than taxes. Sandeep Garg Solutions Class 12 – Chapter 10 – Part B. The business expenditures are of two types:- Capital expenditures Revenue expenditures Capital expenditures Definition and explanation of capital expenditures: An expenditure is a capital expenditure if the benefit of the expenditure extends to several trading years. Difference between Capital Receipts and Revenue Receipts. Difference/Distinction between Capital and Revenue Receipts: 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. Difference between Revenue Expenditure and Capital Expenditure. Examples of non-debt capital receipts are: Recovery of loans, proceeds from sale of public enterprises (i.e., disinvestment, etc.). ... • 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 . Capital Expenditures (iv) This is capital receipt because disinvestment reduces government assets. No decline in government liabilities and does not create assets for the government. 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. What is the difference between revenues and receipts? ANSWERS 1 False. … 7. 2020 Zigya Technology Labs Pvt. 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. 7: Its balance is carried over to Receipts & Payments Account of the next year. 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. Revenue receipts and revenue payments. These refer to those government receipts that cause a reduction in the government assets and also create a liability for the government. All questions and answers from the Economics Solutions Book of Class 12 Commerce Economics Chapter 14 are provided here for you for free. ... CBSE Class 12 Economics Solved Question Paper 2016. 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). The Constitution requires that the budget has to distinguish between receipts and expenditure on revenue account from other expenditure. Difference. Hence borrowing in government budget is a fiscal deficit. The private sector always tend to divert resources towards areas of high profit, while, ignoring areas of social welfare. Explain the role of government budget in influencing allocation of resources. Difference between Revenue Expenditure and Capital Expenditure. 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. 12:43 mins. Any amount received by the business enterprise which […] ADVERTISEMENTS: 3. An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. It states the excess government Revenue Expenditure over Revenue receipts. Capital receipt leads to a reduction in the asset of the government. Surbi, S. Difference Between Capital Expenditure and Revenue Expenditure. Tax Revenue: A fund raised through the various taxes is referred to as tax revenue. These are funds generated from non-operating activities of a business hence are not shown inside the income statement instead they are shown inside a balance sheet.. Usually the cost is recorded in a balance sheet account that is reported under the heading of Property, Plant and Equipment. Ans. Government revenue is the means for government expenditure in the same way as production is means for consumption. revenue deficit of Government. Explain the role the government can play through the budget in influencing allocation of resources. 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. Non-Tax Revenue: Non-Tax revenue refers to receipts of the government from all sources other than those of tax receipts. Difference between Revenue Expenditure and Capital Expenditure. Capital Receipts and Capital payments B. What is the difference between direct tax and indirect tax? What is the basis of classifying government expenditure into revenue expenditure and. RBSE Class 12 Economics Chapter 23 Short Answer Type Questions (SA-I) Question 1. ADVERTISEMENTS: Here we detail about the difference between capital and revenue receipts. Let us learn more about them. ADVERTISEMENTS: Difference Components of Revenue and Capital Receipts! Revenue Receipts are the income gained by the daily operational activities of the business. 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. disinvestment of PSUs. 8. (ii) and (iii) are revenue receipts because these create neither liabilities nor cause any reduction in assets. 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. All Economics Solutions Solutions for class Class 12 Commerce Economics are prepared by experts and are 100% accurate. Government receipts which neither (a) create liabilities, nor(b) reduce assets are called revenue receipts. Transactions—both capital and revenue-are recorded here. The Fiscal deficit is the difference between the government’s total expenditure and total receipts excluding borrowings. Examples: Union excise duties and custom duties, https://www.zigya.com/share/RUNFTjEyMDUxMDI1. Revenue deficit Revenue deficit= revenue expenditure â€“revenue receipts. Sources of Income: Taxation is the primary source of income for a government. Expenditure is basically spending of funds or money to avail services or for purchasing. If it creates an asset or reduces a liability, it is categorised as capital expenditure. Questions given below are important questions and are expected to be asked in Class 12 Economics board exam 2019-20. Capital Receipts ii. Capital Receipts: Money generated from sale of assets, shares, debentures, loan received, investment made by new partner etc. Classification of these transactions reflects in the final statements of the company. Difference between revenue receipts and capital receipt. The difference between capital expenditure and revenue expenditure are expained in tabular form. Whereas when the assets of government are not reduced we get revenue receipts. If revenue receipts are ₹70 crores and capital expenditure ₹120 crores, then how much is the revenue expenditure. Description: The most important receipts under this head are interest receipts (received on loans given by the government to states, railways and others) and … Fiscal deficit c. Budget deficit d. Primary deficit View Answer / Hide Answer. Basis of Difference. It requires a number of infrastructural, economics and welfare activities. 11 Honororium. Capital Receipts are the income generated from the non-operating sources, which are having a long term effect. Borrowing is treated capital receipts because it creates liability of returning loans. Capital receipt and revenue receipt, both are the very important components of accounting. [CBSE 2005, 10] Or The main sources of non-tax revenue are: 1. In a government budget, the revenue deficit is ₹ 35 crores. The purpose of such expenditure is not to build up any capital asset but to ensure normal functioning of government machinery. Explain how taxes and government expenditure can be used to influence. difference between revenue receipts and capital receipts. On the other hand, fiscal deficit is the difference between the total expenditure and the total receipt of the government. through heavy taxes and encourages the use of ‘Khaki products’ by providing subsidies. Primary deficit is the difference between fiscal deficit and interest payment. These do not give rise to debt. 9 Legacy. 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. Definition of Revenues. A receipt journal entry for revenue affects cash or accounts receivable and revenue. Revenue receipts are money received by a business as a result of its normal business operations. 6. Capital receipts are not available for distribution as profits. It is generally a long-period expenditure. "Acquaint with Economics" 09451927636 - Skype Classes for Class XII - transmission Center Kendriya Vidyalaya, Vidisha ( Bhopal Region ) 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. The income tax burden is equitably distributed on different people and institutions. Define tax. It is recurring in nature and incurred regularly. 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