Concept of Capital Budget

Concept of Capital Budget

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One of the two components of the government budget is the Capital Budget. The budget is often split into a capital and a revenue budget. The items that fall under the two budget components are taken into consideration when classifying these goods. The government's investment-related actions are displayed in the capital budget, which is why it is thought to be productive. Capital receipts and payments make up the capital budget. A prediction of the government's capital receipts and capital expenditures is contained in the capital budget. It includes one-time capital expenses. Transactions from the Ledger are also included. These are the capital receipts:

(1) Loans obtained by the government from the general public, also known as market loans, loans obtained from the Reserve Bank and other parties through the sale of Treasury Bills

(2) Receipts for Disinvestment and

(3) Recoveries of loans from the governments of States, Union Territories, and other parties.

The term "capital expenditure" refers to the costs associated with purchasing assets such as real estate, buildings, machinery, equipment, stock investments, etc., as well as loans and advances given by the federal government to state and union territory governments, government corporations, and other parties.

Capital Budget: Goals

1. The capital expenditure's source is evaluated.

2. Determines how much capital will be needed for capital expenditures.

3. Capital expenditures' profitability is evaluated.

4. Choosing Capital Investment Projects and Plans

5. Consider each idea's advantages and disadvantages before choosing the best one.

Components in the capital budget

There are two significant parts to the capital budget:

Loans obtained from the general public (also referred to as market loans), borrowings from the Reserve Bank and other parties through the sale of Treasury bills, loans acquired from foreign bodies and authorities, and repayments of loans given by the Central government to state and Union Territory governments and other parties are all examples of Capital Receipts.

The union government makes investments in stocks, loans, and advances to state and union territory governments, government corporations, and other parties, as well as payments on assets including land, buildings, machinery, and equipment. Capital receipts cause the government's assets to decline or its liabilities to rise. Capital receipts include borrowings, loans from the public or foreign government, and borrowings from a nation's central bank. On the other hand, capital expenditures are costs associated with the creation of equipment, healthcare facilities, and other similar products. The primary objective is to create assets or cut liabilities.