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How Are Capital Expenditure Different from Revenue Expenditure? Discuss Briefly. - Economics

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Short Note

Answer the following question.
How are capital expenditure different from Revenue expenditure?  Discuss briefly.

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Solution

The Revenue Expenditure refers to the government expenditure which does not cause any reduction in government liabilities and also does not create assets for the government. For example- expenditure on salaries, pensions, subsidies, interest payments, etc.
On the other hand, Capital Expenditure refers to that government expenditure, which causes a reduction in government liabilities as well as creates assets for the government. For example- expenditure on purchasing shares, bonds, etc.

Concept: Classification of Expenditure
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