Read the following about the Revenue expenditure.
A. Revenue Expenditure is expenditure incurred for purposes of physical or financial assets of the central government.
B. It does not relate to those expenses incurred for the normal functioning of the government departments and various services, interest payments on debt incurred by the government, and grants given to state governments and other parties (even though some of the grants may be meant for the creation of assets).
Identify the INCORRECT statement/statements.
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Neither A nor B.
Statement A is incorrect because revenue expenditure does not relate to the creation or acquisition of physical or financial assets. Instead, revenue expenditure involves costs associated with the day-to-day functioning of the government, such as administrative expenses, salaries, subsidies, and interest on debt.
Statement B is also incorrect because revenue expenditure does relate to expenses for the normal functioning of government departments, interest payments, and grants, even if some of those grants are used for the creation of assets. The key point here is that grants or expenditures that do not lead to the creation of long-term assets fall under revenue expenditure.
Thus, both Statement A and Statement B are incorrect.