Capital Receipt is the receipt of Government which.

A. Decreases Liabilities of Government
B. Increases Liabilities of Government
C. Increases Assets of Government
D. Decreases Assets of Government
E. Do not change Assets and Liabilities of Government

Choose the correct answer from the options given below:

B, D only

Capital Receipts: The government also receives money by way of loans or from the sale of its assets. Loans will have to be returned to the agencies from which they have been borrowed. Thus they create liability. Sale of government assets, like sale of shares in Public Sector Undertakings (PSUs) which is referred to as PSU disinvestment, reduce the total amount of financial assets of the government. All those receipts of the government which create liability or reduce financial assets are termed as capital receipts. When government takes fresh loans it will mean that in future these loans will have to be returned and interest will have to be paid on these loans. Similarly, when government sells an asset, then it means that in future its earnings from that asset, will disappear. Thus, these receipts can be debt creating or non-debt creating.

tHUS, The correct answer is: B, D only

Explanation:

• B. Increases Liabilities of Government: Capital receipts often involve borrowing or loans taken by the government, which increases its liabilities.

• D. Decreases Assets of Government: Capital receipts may involve the sale of assets, which decreases the assets of the government.