question_answer

Distinguish between revenue expenditure and capital expenditure in Government budget. Give an example of each.

Or

Distinguish between revenue deficit and fiscal deficit.

Answer:

Revenue expenditure: This expenditure relates to the day to day running of the business which does not result in the creation of assets or reduction of liability e.g. salaries and wages.

Capital expenditure: This expenditure spent by a business or a firm on acquiring or maintaining fixed assets, e.g. buildings, land etc.

Or

Revenue deficit is equal to the excess of total revenue expenditure over the total revenue receipts. On the other hand, fiscal deficit is equal to the excess of total expenditure over the sum of revenue and capital receipts excluding borrowings. Thus, it is clear from the above statement, revenue deficit relates to total revenue receipts and total revenue expenditure, whereas, fiscal deficit relates to the difference in total expenditure (revenue and capital) and total receipts (revenue and capital) excluding borrowings.

Revenue Deficit = Total Revenue Expenditure - Total Revenue Receipts

Fiscal Deficit = Total Budget Expenditure (-) (Revenue Receipts + Capital Receipts excluding borrowings)