Which of the following statements is true?

Statement 1- Revenue receipts do not create a corresponding liability for the government.

Statement 2- Capital receipts do not lead to reduction of assets of the government.

Only statement 1 is true

The correct answer is Option 1: Only statement 1 is true

Let's evaluate both statements:

Statement 1: Revenue receipts do not create a corresponding liability for the government. This statement is true. Revenue receipts, such as taxes and other non-debt receipts, do not create any liability for the government. They are essentially income that the government receives and does not have to be repaid.

Statement 2: Capital receipts do not lead to reduction of assets of the government. This statement is false. Capital receipts typically involve borrowing or the sale of assets. These actions either create new liabilities or result in a reduction of assets (e.g., when the government sells assets, its assets decrease).