Structure or components of a government budget broadly consists of two parts—Budget Receipts and Budget Expenditure as shown in the following chart with their classification. The budget also divides authorized expenditure into that which can be carried out without action by Congress and that which … These receipts increase the liability and reduce the asset. Reducing Regional Differences– It aims to reduce regional inequalities by promoting the installation of production units in the underdeveloped regions. Income is the total revenue that comes in, while expenses are the total amounts of money spent. Commerce Mates is a free resource site that presents a collection of accounting, banking, business management, economics, finance, human resource, investment, marketing, and others. Budget. Example: Construction of Metro is a capital expenditure as it leads to the creation of an asset. Government Budget and the Economy – CBSE Notes for Class 12 Macro Economics. He is currently learning Management Studies and is in the Second Year, Made With ♥ By A Person Who Understands Your Pain. It also implies that the government has to make up this deficit from capital receipts i.e. It is a capital expenditure as it increases asset of the Government. Contingency Fund The Consolidated Fund is the source for all the “usual” budgetary transactions whether of capital, revenue or loan nature. Incremental budgeting takes last year’s actual figures and adds or subtracts a percentage to obtain the current year’s budget. How is the annual national budget prepared? It has two components: (I) Budget Receipts: Budget receipts refer to the estimated money receipt of this Government from all sources during a given fiscal year Budge receipt. It mainly shows the past one-year financial performance of government, what new policies and plan relating to finance the government are bringing in the coming year and how it is going to affect the living standard of the people. It will reduce the income of rich and raise the standard of living of the poor, thus reducing inequalities in the distribution of income. Estimated expenditures and receipts are planned as per the objectives of the government. 1. It indicates how much of the Government Borrowings are going to meet the expense. It basically includes the expenses incurred by the government in providing basic services to its citizens and the proper functioning of its departments. Components of Government Budget. Meaning:-Budget is a document containing estimates of revenue and capital receipts as also expenditure of the government for the next financial year. This is to certify that Mr./Mrs. • Lack of information by centre on fiscal activities of sub-national government (China, Lao PDR, Cambodia,Thailand). It explains how revenue is generated or collected . Construction of School buildings. The Budget is planned to deliver different provisions for operating such business and imparting financial help. Disinvestment refers to the act of selling a part or the whole of shares of selected Public Sector undertakings held by the Government. Budget of the government indicates next year’s expenditure plans and programmes and attempts to find resources for the same. Hence this part of the budget has 2 parts that are revenue receipts and revenue expenditure. 5. Creating a personal budget is one of the best things you can do for yourself and your family. Fiscal deficit presents a more comprehensive view of budgetary imbalances. The Government Budget: the government's plan for the upcoming financial year to achieve the desired national objectives within the framework of a financial medium term. Use of capital receipts for meeting the extra consumption expenditure leads to an inflationary situation in the economy. Development expenditure is productive in nature as it adds to the flow of goods and services whereas non-development expenditure is not covered with the productivity of working clash. It also contains the items of expenditure met from such revenue. Government grants various loans to State Government or Union Territories, assets of the Government. It has two components: (I) Budget Receipts: However, any amount borrowed by the Government is not a revenue receipt as it causes an increase in the liability in terms of repayment of borrowings. The sales budget is complemented by an analysis of the resulting expected cash collections. An Expenditure is a development expenditure if it directly adds to the flow of goods and services. To have an acquaintance of Government objectives, capital receipts, capital expenditure, revenue receipts, and revenue expenditure. However, any amount paid as salaries is not capital in the assets. Revenue deficit signifies that the government own revenue is insufficient to meet expenditure on the normal functioning of Government Departments. An expenditure is revenue expenditure if it neither creates an asset nor reduces any liability. High-interest payments on past borrowings have greatly increased the fiscal deficit. Non-tax revenue includes the income earned in the form of fees charged by the government for various services provided like birth, death and property registration, several grant and aids received, fines and penalties charged, income from public sector enterprises, etc. tax collected and various other receipts. It is a capital expenditure as it increases asset of the government. Government Budget in Ghana averaged -7.09 percent of GDP from 2004 until 2019, reaching an all time high of -0.40 percent of GDP in 2004 and a record low of -24.20 percent of GDP in 2008. 4. Government expenditure and taxes can help in fighting price fluctuations. According to Tayler, "Budget is a financial plan of government for a definite period". Budget preparation for the next budget year proceeds while government agencies are executing the budget for the current year and at the same time engaged in budget accountability and review of the past year's budget. State Tax and Non-Tax revenues are The Budget process of our country predates the independence. It implies that the government is discussing i.e. This mainly contains the incomes and revenue generated by the government through different sources i.e. RBI issues new currency for this purpose. It explains how revenue is generated or collected by the government and how it is allocated among various expenditure heads. A government’s budget is considered by most people to be a heavy, technical, and somewhat mysterious document. Implications: Fiscal deficit indicates the total borrowing requirements of the government borrowings not only involve repayment of the principal amount but also required payment of interest. 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