(i) An expenditure that neither creates an asset nor reduces a liability is a revenue expenditure and an expenditure that either creates an assets or reduces a liability is called capital expenditure.
(ii) A tax whose impact and incidence is on same person is a direct tax and tax whose impact and incident can be on a different person is an indirect tax.
Detailed Answer:
(i)
Direct Tax-A tax which is paid by the same person on whom it has been levied is termed as Direct Tax. In case of direct tax, burden can not be shifted on other party e.g. Income Tax.
Indirect Tax-It is a tax which is paid by one person and levied on other person. In case of indirect tax, burden is generally shifted on other party. e.g., Excise Duty.
(ii)
Revenue Expenditure refers to the expenditure which neither creates any asset nor causes reduction in any liability of the government. For example, Payment of salaries. On the other hand, capital expenditure, refers to the expenditure which either creates an asset or causes a reduction in the liabilities of the government. For example, construction of Metro etc.
The government through its budgetary policy attempts to Promote fair and right distribution of income in a society. This is done through taxation and expenditure policy. On one hand, through its taxation policy, the government taxes the higher income group and on the other hand, through the expenditure policy (subsidies, transfer payments, etc.), it transfers the purchasing power in the hands of the poor sections of society. With the help of these policies, the government aims at fair distribution of income in the society.
