Question

Observe the images shown below that represent two types of government expenditure.

Which one of the following statements is correct about government expenditure?

Options

• Image 1 leads to a reduction in asset and causes capital expenditure.

• Image 2 leads to an increase in asset and causes capital expenditure.

• Image 1 leads to an increase in liability and causes revenue expenditure.

• Image 2 leads to a reduction in liability and causes revenue expenditure.

Answer 1

Image 2 leads to an increase in asset and causes capital expenditure.

Explanation:

Image 1 (Mid Day Meal Scheme) is a recurring welfare/education outlay it is revenue expenditure, not creating a long‑term asset. Image 2 (Construction of a Dam) is an expenditure on a public works project that creates a long‑lived government asset and so is capital expenditure.