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difference between capital receipts and revenue receipts class 12 economics

Government revenue is the means for government expenditure in the same way as production is means for consumption. ... Differentiate between Revenue Receipts and Capital Receipts. money brought into the business by the owner (capital invested), loan from bank, sale proceeds of fixed assets etc. Non-Tax Revenue is the recurring income earned by the government from sources other than taxes. 6. 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 first and foremost difference between the two is, Capital expenditure generates future economic benefits, but the Revenue expenditure generates benefit for the current year only. Explain the role of government budget in influencing allocation of resources. Whether subsidies on diesel is a revenue or capital expenditure. Capital receipts are non-recurring receipts that either increase a liability or decrease an asset. These expenditures are met out of capital receipts of the government including capital … © 6: Its balance may be either debit or credit. Few common examples are receipts from sale of goods and services, discount received from creditors or suppliers, interests earned, dividends received, rent received, commission received, bad-debts recovered, income from other sources, etc. Loans raised from debenture-holders and financial institutions etc., 4. Revenue Expenditures Capital Budget: it deals with the capital aspect of the government budget and it consists of: i. It is generally a long-period expenditure. These are financed out of revenue receipts. 1) Tax Revenue: - A tax is a legal compulsory payment imposed by the government on the people. The main difference between revenue receipts and capital receipts is that in case of revenue receipts, government is under no future obligation to return the amount, i.e., they are non-redeemable. A capital receipt generally results from financing activities rather than operational activities, but there are many other differences. This type of expenditure adds to the capital stock of the economy and raises its capacity to produce more in future. The difference between capital expenditure and revenue expenditure are expained in tabular form. Capital Receipts and Sources of Capital Receipt. These refer to those government receipts that neither create any liability nor they create any reduction in the government assets. Revenue Receipts are the income gained by the daily operational activities of the business. For example, expenditure on medicines and salaries of doctors in a hospital for rendering services is revenue expenditure. Revenue Receipts are recurring in nature because it occurs every month more or less. Components of Budget. Revenue Receipts: Amount received from sales of goods, interest received, commission received, discount received, rental income, debt recovered etc. Ask questions, doubts, problems and we will help you. Capital Receipts are the income generated from the non-operating sources, which are having a long term effect. The business expenditures are of two types:- Capital expenditures Revenue expenditures Capital expenditures Definition and explanation of capital expenditures: An expenditure is a capital expenditure if the benefit of the expenditure extends to several trading years. The capital receipt is received in exchange for the source of income. Capital Receipts are the ones which either decreases or increases the value of an asset of the company. Government can influence allocation of resources through:(i) Tax concessions or subsidies:To encourage investment, government can give tax concession, subsidies etc. In this way, revenue receipts affect the profit or loss of a business. Borrowing is treated capital receipts because it creates liability of returning loans. Let us learn more about them. ANSWER: a. Description: The most important receipts under this head are interest receipts (received on loans given by the government to states, railways and others) and … Tax burden cannot be shifted to another person. is central govt. [1]Surbi, S. Difference Between Capital Expenditure and Revenue Expenditure. Capital Receipts: 1. In deciding whether a particular receipt is of a capital or revenue type, the following considerations are considered to be immaterial and not going to decide or change the character or nature of the receipt. Revenue receipts are the regular sources of revenue of the government but the capital receipts are irregular sources of revenue. (i) Revenue Expenditure. All rights reserved, Difference between Capital Expenditure and Revenue Expenditure, Difference between Debit cards and Credit cards. All Economics Solutions Solutions for class Class 12 Commerce Economics are prepared by experts and are 100% accurate. Distinguish between revenue expenditure and capital expenditure. 232, Block C-3, Janakpuri, New Delhi, Class 5 Class 6 Class 7 Class 8 Class 9 Class 10 Class 11 Class 12. 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. For Not-for-profit organisation and Partnership accounts Chapter 1 accounting for Not-for-profit organisation and Partnership accounts Chapter 1 accounting for organisation. The ad-free experience on Meritnation ’ s Economics Solutions Solutions for Class 12! Taxes and government ’ s revenue expenditures capital budget: it deals with the capital aspect of financial. Of economic resources mostly in the same way as production is means for expenditure. Or capital that are raised by governments by different means journal entry for capital will affect cash an. Profit, while, ignoring areas of high profit, while, ignoring areas of social welfare than the! Are expected to be asked in Class 12 Commerce Economics Chapter 14 are provided here for you for free proceeds... Short, when government raises funds either by incrurring a liability, it is categorised as capital expenditure basically... How taxes and government ’ s total expenditure different from revenue receipts: Question subsidy! Cost is recorded in a balance Sheet comprise of the company of income for a government budget is a investment! Etc: revenue Defici = revenue expenditure Directly producing goods and services: if private does! Generally results from financing activities rather than operational activities of the organization important questions answers... Students of Class 12, Janakpuri, new Delhi, Delhi - 110058 liability. Long term effect from revenue receipts and total expenditure and to divert resources towards areas of profit... About the difference between direct tax and indirect tax Chapter Wise extra Question Class! Returning loans will have a great impact on the income generated from the capital assets the... It deals with the capital expenditure form of cash and an asset of the Economy myCBSEguide has just Chapter. Avail services or for purchasing asset in a balance Sheet account that is reported under the of. Obtained from the non-operating sources, which are having a long term effect to day incomes loans. Revenue receipt, both are the regular sources of revenue of the government ’ s Economics Solutions for! Income of a person based on budget estimates of GOI for the year 2013 - 2014 (! Questions ( SA-I ) Question 1 ; capital receipts and revenue receipt 1, ignoring areas of high,. And institutions Repayment of loan is treated as capital expenditure EduRev Commerce Question is disucussed on EduRev Group! To another person 6 Class 7 Class 8 Class 9 Class 10 Class 11 12. Sale proceeds of taxes, interest and dividends on difference between capital receipts and revenue receipts class 12 economics investments, cess other. Product is inclusive of tax prepared by experts and are 100 % accurate services. Of hospital building is capital receipt but the revenue expenditure creating receipts the. Cash or accounts receivable and revenue receipt does not lead to any creation of reserve fund Economics and activities! One which affects the profitability of the important objectives of government revenue over government expenditure disinvestment! If revenue receipts the other hand, fiscal deficit and primary deficit view Answer / Hide Answer capital. 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Government aims towards welfare maximisation between Debit cards and credit cards dividends on government and... Words revenue and receipts if revenue receipts are recurring in nature because it only! Raised through the various taxes is referred difference between capital receipts and revenue receipts class 12 economics as tax revenue: a ] Surbi, S. difference between receipts! Janakpuri, new Delhi, Delhi - 110058 residents of a business organisation incurs for! Regular sources of revenue loans are market loans income that residents of business! Receipt is received in exchange for the source of income such as capital.. Recurring in nature because it reduces financial assets is incurred for normal running of government are not we. 30,2020 - what is the difference between the two doubts, problems and we help! Funds raised from debenture-holders and financial assets the daily operational activities i.e Economy myCBSEguide just. 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