Question

All those elements which create liability and decrease the assets of government are known as :

• A. Capital Receipts
• B. Capital Payments
• C. Revenue Receipts
• D. Revenue Payments

Answer 1

The Correct Option is A

Capital Receipts include loans, borrowings, and the sale of assets, which increase liabilities or reduce assets.

Answer 2

Capital Receipts refer to funds received by the government that lead to an increase in liabilities or a reduction in assets. These receipts are typically non-recurring and are used for financing long-term expenditure, rather than for day-to-day operations.

Some common examples of capital receipts include:

• Loans: Funds borrowed by the government from both domestic and international sources. These loans increase the government's liabilities, as they are expected to be repaid in the future.
• Borrowings: Similar to loans, borrowings refer to the government’s act of raising funds through instruments such as bonds, debentures, or treasury bills, which create future obligations.
• Sale of assets: When the government sells public sector enterprises, land, or other assets, it receives capital receipts. This reduces the government's asset base but increases its immediate cash reserves.

Unlike revenue receipts, which are part of the regular income for the government (such as taxes), capital receipts are generally non-recurring and contribute to financing capital expenditures or reducing fiscal deficits. Therefore, while capital receipts increase funds available in the short term, they can lead to long-term liabilities or a decrease in the government’s asset holdings.