Distinguish between revenue expenditure and capital expenditure - Economics - Government Budget and the Economy

Question

Distinguish between revenue expenditure and capital
expenditure

Bhawna Madaan · Accepted Answer

Basis

Revenue expenditure

Capital expenditure

Creation of Assets

It does not create assets for the government

It results in the creation of assets

Reduction of Liability

These expenditures do not result in the reduction of
liability

These expenditures cause a reduction of the liability of the
government

Items

(a) Aids given to states and others
(b) Interest payments
(c) Expenditure on defence

(a) Purchase of shares
(b) Expenditure on land, building, etc
(c) Grants by the central government to the state government

Basis	Revenue expenditure	Capital expenditure
Creation of Assets	It does not create assets for the government.	It results in the creation of assets.
Reduction of Liability	These expenditures do not result in the reduction of liability.	These expenditures cause a reduction of the liability of the government.
Items	(a) Aids given to states and others (b) Interest payments (c) Expenditure on defence	(a) Purchase of shares (b) Expenditure on land, building, etc. (c) Grants by the central government to the state government

Distinguish between revenue expenditure and capital expenditure.