Answer the following question What are the main components of budget?

Answer the following question

What are the main components of budget?

Components of the budget can be divided into two broad categories:
1. Revenue budget
2. Capital budget

i. Revenue budget - It consists of those items that lead neither to a change in the assets nor a change in the liabilities of the government. This can further be classified into two categories, namely:

a. Revenue receipts - These are those receipts of the government which neither create any liability nor any reduction in the assets of the government. These comprise of tax and non-tax receipts, duties and fines, interest and dividends receipts on government investments and assets.

b. Revenue expenditure - This refers to the government expenditure which does not cause any reduction in government liabilities nor create any assets for the government. For example- expenditure on salaries, pensions, subsidies, interest payments etc.

ii. Capital Budget - It consists of items that lead either to a change in the assets or a change in the liabilities of the government.  This can further be classified into two categories, namely:

a. Capital receipts - These are those receipts of the government, which cause a reduction in the government assets and also create a liability.  For example - recovery of loans, borrowings etc.

b. Capital expenditure - This refers to that government expenditure which causes a reduction in the government liabilities as well as creates assets for the government. For example - expenditure on purchasing shares, bonds etc.

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