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

In economics, the elements which create liabilities or decrease the assets of the government are referred to as Capital Receipts. These receipts impact the financial position of the government by increasing its liabilities or decreasing its assets. Examples include the issuance of bonds or securities and disinvestment proceeds. Therefore, among the options: 

• Capital Receipts - Correct answer, as they pertain to the creation of liabilities or reduction of assets.
• Capital Payments - Refers to expenditure incurred on acquiring assets such as infrastructure, property, or equipment.
• Revenue Receipts - Refers to the regular income generated by the government, such as taxes, fees, and other inflows that do not create any liabilities.
• Revenue Payments - Refers to the routine expenses incurred by the government for its operational activities.

Thus, the correct answer is Capital Receipts.

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.