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Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Government Budget and Economy

Question:

Rohit and Adeeb, two friends from class 12th studying economics, are very confused between capital and revenue expenditure and income. They want to understand the terms with some example. Match the following examples with these terms to help them out-

a) Outflow on the acquisition of land, building, machinery, equipment, investment in shares, and advancement of loans, repayment of loans. i) Revenue Receipt

b) Outflow on payment of interest on loan, salaries, subsidies etc.
ii) Capital Receipt

c) Inflow by sale of assets, like shares in Public Sector Undertakings (PSUs) and by taking loans, receiving back the loan advanced.		 iii) Revenue Expenditure
d) Inflow by the way of taxes, interest receipts on account of loans advanced, dividends and profits on investments, fees etc.

iv) Capital Expenditure

 

Options:

a-iii, b-iv, c-ii, d-i

a-iv, b-iii, c-i, d-ii

a-iv, b-iii, c-ii, d-i

None of these

Correct Answer:

a-iv, b-iii, c-ii, d-i

Explanation:

The correct answer is Option 3: a-iv, b-iii, c-ii, d-i

a) Outflow on the acquisition of land, building, machinery, equipment, investment in shares, and advancement of loans, repayment of loans.
iv) Capital Expenditure

b) Outflow on payment of interest on loan, salaries, subsidies etc.
iii) Revenue Expenditure

c) Inflow by sale of assets, like shares in Public Sector Undertakings (PSUs) and by taking loans, receiving back the loan advanced.		 ii) Capital Receipt
d) Inflow by the way of taxes, interest receipts on account of loans advanced, dividends and profits on investments, fees etc.
i) Revenue Receipt

Revenue receipts: They are the receipts which neither create liability nor do they create burden on govt.
Capital receipts: These are the receipts which either create liability or reduce the assets.
Revenue expenditure: They are the expenditure which neither creates assets nor reduces the liability.
Capital Expenditure: These are the expenditure which either creates asset or reduces the liability.

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