Q.4 Difference between Capital Expenditure and Revenue Expenditure
Ans: When government incurs expenditure to create assets such as school and hospital buildings, roads bridges, canals, railway lines etc., or reduce its liability such as repayment of loan etc., such expenditure is known as capital expenditure. But when government incurs expenditure that neither creates any asset nor reduces any liability, such expenditure is known as revenue expenditure. For Example, payment of salaries to government employees, maintenance of public property, providing free education and health services to people, etc constitute revenue expenditure. These do not create any public asset.
| Source : NIOS: Chapter 29 Page number 293 : PDF Link |
| Keywords: दीर्घकालिक लाभ (Long-term benefit), संपत्तियों का सृजन या सुधार (Creation or enhancement of assets), अल्पकालिक लाभ (Short-term benefit), बार-बार होने वाला व्यय (Recurring expenditure) |
| Extra Info : Characteristics of Private goods: Private goods are rivalrous in consumption.These goods are subject to the exclusion principle.They satisfy individual wants.These goods can be produced through free market pricing mechanism.These are divisible in so far as their use is concerned.Marginal cost of providing a private good to an extra consumer is always positive.They reveal the preference of the consumers through effective demand and market price which are the signals for the producers to produce the goods the individuals want Characteristics of public goods: They are non-rivalrous i.e.no one has an exclusive right over the consumption of the good.They are non excludable i.e. if one person consumes a good it is not possible to prevent others from consuming it.These goods are of collective consumption.These goods may not be produced through the free market pricing mechanism.They are indivisible.The consumption of a public good is always joint and equal.Public goods create externalities or divergences between social and private benefits.People can enjoy the benefits of public goods whether they pay for them or not which is the so called free- rider problem |