Consider the following statements:
I. Capital receipts create a liability or cause a reduction in the assets of the Government.
II. Borrowings and disinvestment are capital receipts.
III. Interest received on loans creates a liability of the Government.
Which of the statements given above are correct?
Answer: (a) I and II only Explanation: ● Statement I is correct: Capital receipts either increase liabilities (e.g., borrowings) or reduce assets (e.g., disinvestment), as per government accounting principles. ● Statement II is correct: Borrowings (like loans or bonds) and disinvestment (sale of public sector assets) are classic examples of capital receipts. ● Statement III is incorrect: Interest received on loans is a revenue receipt, not a capital receipt, as it does not create a liability or reduce assets. Instead, it is income earned from loans already extended.