What is the basis of classifying government expenditure into ‘Revenu

1.	What is the basis of classifying government expenditure into ‘Revenue Expenditure’ and ‘Capital Expenditure’? Which of these types of expenditure is payment of salaries of government employees and why?
Answer» The basis of classifying government expenditure into revenue expenditure and capital expenditure is : whether or not an expenditure leads (i) creations of assets or (ii) reduction in liabilities. If yes, it is a capital expenditure. If no, it is revenue expenditure. Any expenditure by the Central Government that either creates an asset or reduces a liability is categorized as capital expenditure. Any expenditure by the Central Government that neither creates asset nor reduces liability is categorized as revenue expenditure. Payment of salaries to government employees is a revenue expenditure since it neither creates an asset nor reduces a liability.

What is the basis of classifying government expenditure into ‘Revenue Expenditure’ and ‘Capital Expenditure’? Which of these types of expenditure is payment of salaries of government employees and why?

Answer»

The basis of classifying government expenditure into revenue expenditure and capital expenditure is : whether or not an expenditure leads (i) creations of assets or (ii) reduction in liabilities. If yes, it is a capital expenditure.

If no, it is revenue expenditure.

Any expenditure by the Central Government that either creates an asset or reduces a liability is categorized as capital expenditure.
Any expenditure by the Central Government that neither creates asset nor reduces liability is categorized as revenue expenditure.

Payment of salaries to government employees is a revenue expenditure since it neither creates an asset nor reduces a liability.

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What is the basis of classifying government expenditure into ‘Revenue Expenditure’ and ‘Capital Expenditure’? Which of these types of expenditure is payment of salaries of government employees and why?

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