The capital account in the government budget deals with:
Show answer & explanation
Correct answer: C
Explanation
Answer: Government assets and liabilities.
Explanation:
The Capital Account of the government budget includes those receipts and payments that result in the creation of government assets or a reduction in liabilities. This comprises market borrowings, loans received from foreign governments, and the recovery of loans (on the receipts side); as well as investments in infrastructure, the purchase of shares, and the repayment of loans (on the expenditure side). Conversely, recurring expenses—such as salaries, subsidies, and tax collections—form part of the 'Revenue Account'.
Additional Points:
Capital Expenditure: This enhances the country's productive capacity (e.g., the construction of schools, hospitals, or flyovers).
Capital Receipts: This also includes funds generated through disinvestment.
Potential Exam Questions and Answers:
Question: What is the income generated from the sale of shares in Public Sector Undertakings (PSUs) called?
Answer: Capital Receipt.
Question: Which account does the purchase of defense equipment fall under?
Answer: Capital Expenditure.