Question

With reference to government budget, classify the following as Revenue receipt or Capital receipt. Give a valid reason for each.

1. Financial help from a Multinational Corporation (MNC) for victims in a flood affected area.
2. Sale of shares of a Public Sector Undertaking (PSU) to a private company.

Answer 1

Classification of Government Receipts:

Transaction	Type of Receipt	Reason
(a) Financial help from an MNC for flood victims	Revenue Receipt	This is a one-time grant that does not create any liability or reduce government assets. It is a non-recurring income for the government.
(b) Sale of shares of a Public Sector Undertaking (PSU) to a private company	Capital Receipt	The sale of PSU shares reduces government ownership in public enterprises, affecting assets rather than income.