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Summary of Different Revenue and Capital Receipts and Expenditure

Types of Receipts and Payments in Budget - Teachoo.JPG

Difference between Revenue & Capital Receipts - Teachoo.JPG

Different types of Expenditure in Budget - Teachoo.JPG

Difference between Capital and Revenue Expenditure - Teachoo.JPG

 

Lets learn more about it by taking some examples

 

Example 1 -Savings Schemes of Govt

In this case, first Public invest in Scheme of Govt like NSC (National Savings Certificate)

Govt gives interest on these Savings to Public

Later Govt repays amount to public

Saving Schemes of Govt - Teachoo.JPG

Saving Schemes of Govts - Teachoo.JPG

 

Example 2-Loan by Central Govt to State Govt

In this case, Central Govt gives loan to State Govt

State Govt later repays this loan to Central Govt (with or without interest)

Effect of Loan given and Repaid to State Govt - Teachoo.JPG

Example 3- Investment in PSU

Govt invest its funds in setting up of Govt companies called PSU (Public Sector Undertaking)

If these PSU are not working profitably

Govt sometimes sell them to public or private companies

This is called Disinvestment

Government Transactions with Public Sector Undertaking (PSU) - Teachoo.JPG

Government Transactions with Public Sector Undertaking (PSU) (2) - Teachoo.JPG

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Transcript

Types of Receipts and Payments in Budget Receipts of Govt (Money Received) Revenue Receipts Capital Receipts Expenditure Of Govt (Money Paid) Revenue Expenditure Capital Expenditure Example 1- Understanding Revenue Receipts and Capital Receipts in General Sense Suppose a person receives following money Salary 50,000 Gift from Father 10,000 Loan from Friend 40,000 Sale of Shares 80000 Total Receipts 180000  Revenue Receipt (not to be Returned)  Revenue Receipt (not to be Returned)  Capital Receipts (it increases liability)  Capital Receipts (it reduces liability) Difference between Revenue & Capital Receipts Revenue Receipts Capital Receipts They are Non-Redeemable (They do not have to be Returned) They are Redeemable (They have to be Returned) Example Example They are recurring in nature They are non recurring Example Example Tax will be collected again and again Public may not invest again in Bonds Different types of Expenditure in Budget Capital Expenditure These expenditure which Create Asset or Reduce liability of Govt Example Purchase of Building by Govt Loan given Loan taken Repaid by Govt Revenue Expenditure These expenditure do not Create Asset or Reduce liability of Govt Example Purchase of goods by Govt Grants given Interest Exp on loan taken Difference between Capital and Revenue Expenditure Capital Expenditure They are normally one time expenses Example- Purchase of Building is one time expenses There is future obligation to Return the amount on the other party. Example Loan given by Central Govt to State Govt This will be returned by State govt in future Revenue Expenditure They are Recurring Expenses Example-Maintenance of Building is to be done regularly There is no obligation to Return the amount on the other party. Example Grant given by Central Govt to State Govt This is not to be returned by State govt in future Saving Schemes of Govt Govt launches different schemes in which Public Invest money Example Post office Savings scheme, NSC (National Savings Certificate) When Public Invest Public For Govt It is like Loan taken from Public (It Increases liability So, Capital Receipt) When Govt Pays interest Public For Govt It is a Revenue Expenditure Govt Saving Schemes of Govt Govt launches different schemes in which Public Invest money Example Post office Savings scheme, NSC (National Savings Certificate) When Govt Repays Amt Public Govt For Govt It reduces liability So its Capital Expenditure Repayment Effect of Loan given and Repaid to State Govt Loan given By Central Govt to State Govt Central Govt It is Capital Expenditure Increases Assets (loan given is Asset) It is Capital Receipt Increases Liability (loan taken is a liability) It is Capital Receipt Increases Liability (loan taken is a liability) State Govt Repays loan to Central Govt Central Govt It is Capital Receipt Reduces Assets It is Capital Expenditure It Reduces liability State Govt Loan Repaid Government Transactions with Public Sector Undertaking (PSU) Investment in PSU Investment Govt It is Capital expenditure of Govt (Increases Investment of Govt which is an asset) Sale of PSU (Disinvestment) Govt It is Capital Receipt of Govt (Reduces Asset) PSU Government Transactions with Public Sector Undertaking (PSU) Profit/Dividend from PSU Govt Dividend It is Revenue Receipt of Govt (non -redeemable receipts) PSU It is Revenue Receipt of Govt (non -redeemable receipts)

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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 12 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.