Question

Distinguish between Revenue Expenditure and Capital Expenditure of a government, with suitable example.

Hint:

Revenue expenditure covers routine government spending, whereas capital expenditure involves investments in long-term assets.

Answer 1

- Revenue Expenditure refers to the government’s expenditure on items that do not result in the creation of assets or reduction of liabilities. These are typically incurred to meet day-to-day expenses of the government. Examples include:
- Salaries of government employees
- Interest payments on loans
- Subsidies and grants given to individuals or organizations - Capital Expenditure refers to the expenditure that is incurred to create physical or financial assets or to reduce liabilities. It typically involves the purchase of assets or investment in projects that lead to future economic benefits. Examples include:
- Expenditure on infrastructure like roads, bridges, and buildings
- Investment in machinery or technology
- Government investment in public sector enterprises. 
Conclusion: Revenue expenditure is meant for routine operational costs, while capital expenditure is aimed at creating long-term assets that improve the nation’s productive capacity.