All those elements which create liability and decrease the assets of government are known as:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Capital Receipts
All receipts of the government that create liability or reduce financial assets are capital receipts. A loan creates a liability, as it has to be returned. The sale of shares in a Public Sector Undertaking (PSU) reduces financial assets.
Option (1) Capital Receipts — Correct. The money comes in now, but the government owes more or owns less afterwards.
Option (2) Capital Payments — Incorrect. This is capital expenditure, which works the opposite way. It creates physical or financial assets or reduces financial liabilities, as in buying land or machinery.
Option (3) Revenue Receipts — Incorrect. These are tax and non-tax revenues. They do not lead to a claim on the government, so they create no liability.
Option (4) Revenue Payments — Incorrect. This is revenue expenditure, spent on the normal running of government departments and on interest payments. It creates no physical or financial assets.
NCERT (2026-27): “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.…” |