Question 40
Set 2
Contents
QQuestion
I. Capital receipts create a liability or cause a reduction in the assets of the Government.
II. Borrowings and disinvestment are capital receipts.
III. Interest received on loans creates a liability of the Government.
Which of the statements given above are correct?
OOptions
✓Correct Answer
DDalvoy Solutions
Analyzing statements about government receipts:
I. Capital receipts create a liability or cause a reduction in assets: Correct. Capital receipts either create a liability for the government (like borrowings that must be repaid) or reduce government assets (like disinvestment of public sector enterprises).
II. Borrowings and disinvestment are capital receipts: Correct. Both borrowings (which create liabilities) and disinvestment proceeds (which reduce government assets) are classified as capital receipts in government accounting.
III. Interest received on loans creates a liability: Incorrect. Interest received on loans given by the government is a revenue receipt, not a capital receipt, and it does not create any liability for the government. It actually represents income earned on government assets.
SUPSC Prelims Strategy and Tips
For government finance questions, distinguish between capital and revenue receipts based on whether they affect the government's assets/liabilities (capital) or represent regular income/expenditure (revenue).