Difference Between Capital Expenditure and Revenue Expenditure A business organisation incurs expenditures for various purposes during its existence. Transactions—both capital and revenue-are recorded here. (A) Capital expenditure which leads to creation of assets are (a) expenditure on purchase of assets like land, buildings, machinery and construction of roads, canals, etc. Difference between Revenue Expenditure and Capital Expenditure. Revenue deficit = Revenue expenditures − Revenue receipts. (B) Repayment of loan to World Bank, foreign government, etc. Revenue deficit is the difference between government’s revenue expenditures and government’s receipts. 8 Subscription. 12:43 mins. 8. You will also love the ad-free experience on Meritnation’s Economics Solutions Solutions. An expenditure which either creates an asset (e.g., School building) or reduces a liability (e.g., repayment of loan) is called capital expenditure. C. Current year and previous year D. All the above. The purpose of such expenditure is not to build up any capital asset but to ensure normal functioning of government machinery. Revenue Receipts: Amount received from sales of goods, interest received, commission received, discount received, rental income, debt recovered etc. Revenue Receipts. Broadly, any expenditure that does not lead to any creation of assets or reduction in liability is treated as revenue expenditure. 2. Business receipts are inflow of economic resources mostly in the form of cash and cash equivalents. 5: Only revenue transactions are recorded here. Revenue Receipts ii. A receipt journal entry for capital will affect cash and an asset or liability account. Thereby the tax burden falls more on the rich than on the poor. Basis of Difference: Capital Receipts. The difference between capital expenditure and revenue expenditure are expained in tabular form. Differences Between Current Account and Capital Account. 7:35 mins. What is the difference between revenues and receipts? This type of expenditure adds to the capital stock of the economy and raises its capacity to produce more in future. Any income that does not generate a liability is revenue.For example, if the Government borrows money from World Bank, it will increase its liabilities (because this money has to be paid back)- so cannot be called revenue. Difference. Generally, expenditure incurred on normal running of the government departments and maintenance of services is treated as revenue expenditure. In short, when government raises funds either by incrurring a liability or by disposing of assets,it is called a capital receipt. On the other hand, fiscal deficit is the difference between the total expenditure and the total receipt of the government. For example, construction of hospital building is capital expenditure. Bank Loan, Debenture etc: Revenue Receipts are that amount which is received/earned from operational activities i.e. What is a capital expenditure versus a revenue expenditure? | EduRev Commerce Question is disucussed on EduRev Study Group by 165 Commerce Students. It is imposed on an individual but is paid by another person either partly or wholly. (ii) Capital Expenditure. 10:27 mins. The term “Revenue Receipt” is made up of two words revenue and receipts. 6: Its balance can never be credit. Capital receipt is shown on the liabilities side of the Balance Sheet. The main difference between revenue receipts and capital receipts is that revenue receipts are recurring in nature, which the government can expect to receive year after year, whereas capital receipts are a kind of one-time income. Tax Revenue: A fund raised through the various taxes is referred to as tax revenue. difference between revenue receipts and capital receipts. assets because it owns money that it lends. If it creates an asset or reduces a liability, it is categorised as capital expenditure. How? Non-Tax Revenue is the recurring income earned by the government from sources other than taxes. Prices are affected because the price of the product is inclusive of tax. RBSE Class 12 Economics Chapter 23 Short Answer Type Questions (SA-I) Question 1. All questions and answers from the Economics Solutions Book of Class 12 Commerce Economics Chapter 14 are provided here for you for free. Capital Expenditures Some of these expenditures are meant to bring in more profits for the organisation in the long term while some expenditures are for the short term. The main sources of non-tax revenue are: 1. Tax revenue consists of proceeds of taxes and other duties levied by the Union government such as income tax, corporate tax, excise duty, customs […] Explain how taxes and government expenditure can be used to influence. In a mixed economy, the private producers aim towards profit maximisation, while, the government aims towards welfare maximisation. Thus recovery of loan by Central govt. Allocation of resources is one of the important objectives of government budget. A decline in the government liabilities and creates assets for the government. Definition of Revenues. Thus these are current income receipts of the government from all sources. 2. It is incurred for normal running of government departments and maintenance. Difference Between Capital Receipts And Revenue Receipts. 22 May 2017. Components (Sources) of Revenue Receipts: Revenue receipts of the government are divided into two groups, namely, (i) tax revenue and (ii) non-tax revenue. The misrepresentation between capital expenditures and revenue expenditures will have a great impact on the soundness of the financial statements. Revenue budget has two parts: i. Capital receipts comprise of the loans or capital that are raised by governments by different means. Current account is the financial account of the economy or any individual entity which shows results of various revenue income and expenditure and calculates revenue profits while capital account indicates various capital income and expenditure like purchase and sale of fixed asset, capital repairs, sale of investments etc Government receipts are divided into two groups — Revenue Receipts and Capital Receipts.Basis of classification—All government receipts which either create liability or reduce assets of the government are treated as capital receipts whereas receipts which neither create liability nor reduce assets of the government are called revenue receipts. Capital Receipts are the income obtained from the capital assets of the organization. Sources of Income: Taxation is the primary source of income for a government. FD= Total Expenditure- (Revenue Receipts+ Non-Debt Creating Capital Receipts) It does not result in creation of assets. It is recurring in nature and incurred regularly. Key Difference: The main difference between Revenue and Receipt is that receipt is the cash received and is also known as cash inflow or 'Cash Receipt' meaning cash received by the entity, but it also includes revenue and other loans that it has to repay back.Revenue means the benefits the entity has received or earned by its main business and the earning is it's own and does not need to be paid back. Components of Budget. ... Capital transactions (c) Autonomous transactions (d) Accommodating transactions. A revenue receipt does not reduce the liability of the government and it does not add to assets of the government. Capital receipts cannot be utilized for the creation of reserve fund. 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