Borrowings and recovery of loans
Categorize the borrowings and recovery of loans into capital and revenue receipts of government budget. Give reason too.
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Answer: Borrowings are capital receipts since the government is beneath obligation to return the amount all along with interest therefore it creates liability for government. Recovery of loans is as well capital receipts since such decrease assets of the government.
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Why the borrowings by Government are taken as capital receipts?
Why is tax considered as revenue receipt? Answer: Since tax neither makes a liability for government nor decreases assets of the government.
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