Question

Giving reasons, categorise the following into revenue receipts and copital receipts. (12C, A14)
(i) Recovery of loan, (ii) Corporation tax, (iii) Dividend on investment made by govt., (iv) Sale of public sector undertaking, (v) Interest received on loans, (vi) Dividend received from public interprises, (vii) Grants from foreign govt. (viii) Income tax received by govt. and (ix) Borrowing from public. (x) Loan received from World Bank (xi) Grants received from abroad, (xii) Borrowing from public.

Answer 1

(i) It is capital receipt as it reduces financial assets. (ii) and (iii) are revenue receipts because they create neither liabilities nor assets. (iv) It is capital receipt as disinvestment reduces government assets. (v) It is revenue receipt as it neither creates liablility not reduces asset (vi) Divedend is revenue receipt. (vii) and (viii) are revenue receipts (ix) Borrowing is capital receipts as it creates liability. (x) Loan from World Bank is capital receipt as it creates liablility. (xi) Grants received from abroad is revenue receipt as it creates neither liability nor reduces asset. (xii) Borrowing from public is a capital receipt as it creates liability for the government.