Question

Classify the following items into revenue expenditure and capital expenditure. Give reasons for your answers.

(i) Free supply of stationery to the students by the government

(ii) Economic assistance according to ladli scheme

(iii) Expenditure on the construction of computer laboratory in school by the government

(iv) Expenditure on mid-day meal given to student by the government

Answer 1

(i) It is a revenue expenditure since it neither creates an asset nor reduces liabilities of government.

(ii) It is a revenue expenditure since it neither creates an asset nor reduces liabilities of government.

(iii) It is a capital expenditure since it creates assets of the government.

(iv) It is a revenue expenditure since it neither creates an asset nor reduces liabilities of government.