question_answer

 

Is the following revenue expenditure or capital expenditure in the context of government budget? Give reasons.

(i) Expenditure on collection of taxes.

(ii) Expenditure on purchasing computers.

Answer:

(i) Expenditure on collection of taxes is a revenue expenditure. This type of expenditure includes the government expenditure which does not cause any reduction in government liabilities and also does not create assets for the government.

(ii) Expenditure on purchasing computers is a capital expenditure. This expenditure includes that government expenditure, which creates assets for the government.