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What is the basis of classify government expenditure into revenue expenditure and capital expenditure? Give an example of each. |
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Answer» There are two basis of classifying the expenditure- i) Creation of an asset ii) Reduction of any liability. Any expenditure that neither creates an asset nor reduces any liability is called revenue expenditure. Example- Payment of salaries, subsidies, interest payment etc. Any expenditure that either creates an asset or reduces any liability is called capital expenditure. Example- Construction of factory, repayment of loan, purchase of share etc |
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