Why are grants for asset creation still considered Revenue Expenditure?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. They do not create direct central assets.
In government accounting, an expenditure is classified as "Capital" only if it results in the creation of an asset owned by the entity making the payment. When the Central Government provides grants to States or UTs for building infrastructure (like roads or schools), the resulting assets belong to the State, not the Center. Therefore, from the Central Government's perspective, this outflow does not create a direct asset on its own balance sheet, leading it to be categorized as Revenue Expenditure.