Question

Recovery of Loans & Advances is a capital receipt because:

Options

• It represents repayments of loans given by the government, thereby reducing financial assets

• It creates a liability for the government

• It is a tax levied by the Central Government

• It increases the government's financial assets

Answer 1

Recovery of loans and advances refers to the repayments of loans earlier given by the government. Since such recovery reduces the government's financial assets, it satisfies the defining feature of a capital receipt.