BANKING AFFAIRS

Detailed explanation-1: -The government generally uses the term budget deficit when referring to spending rather than businesses or individuals. Budgetary deficit is the difference between all receipts and expenses in both revenue and capital account of the government.

Detailed explanation-2: -The difference between the total expenditure of Government by way of revenue, capital and loans net of repayments on the one hand and revenue receipts of Government and capital receipts which are not in the nature of borrowing but which finally accrue to Government on the other, constitutes gross fiscal deficit.

Detailed explanation-3: -Q. Fiscal deficit is the difference between the government’s total expenditure and its total receipt, including borrowings.

Detailed explanation-4: -On the receipts side, taxes would be the most important revenue receipt. On the expenditure side, anything that does not result in creation of assets is treated as revenue expenditure. Salaries, subsidies and interest payments are good examples of revenue expenditure.

Detailed explanation-5: -Difference between Revenue Expenditure and Capital Expenditure. An expenditure that neither creates assets nor reduces a liability is categorized as revenue expenditure. If it creates an asset or reduces a liability, it is categorized as capital expenditure. This is the basis of classification between the two.