Consider the following statements:
I. Capital receipts create a liability or cause a reduction in the assets o

Question

Consider the following statements:
I. Capital receipts create a liability or cause a reduction in the assets of the Government.
II. Borrowings and disinvestment are capital receipts.
III. Interest received on loans creates a liability of the Government.
Which of the statements given above are correct?

Accepted Answer

Capital receipts are those government receipts that either create a liability (like borrowings) or result in a reduction of assets (like disinvestment of shares). Therefore, statements I and II are correct. Interest received on loans advanced by the government is revenue earned, not a creation of liability; it represents a reduction in the assets of the borrower, not the government.