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The Government : Budget And The Economy
Question
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Why is payment of interest a revenue expenditure?

Answer

Because it neither creates assets nor reduces government's liability.

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Some More Questions From The Government : Budget And The Economy Chapter

Differentiate between Revenue Receipts and Capital Receipts.

Describe components of Revenue Receipts (Receipts from tax revenue and non tax revenue).
or
Distinguish between Tax and non-tax revenue. Name two sources of non-tax revenue receipts.  

Explain components of Capital Receipts.
or
Name two sources of Capital Receipts.
or
Why is recovery of loan treated as a capital receipt? 

Giving reasons categorise the following into revenue receipts and capital receipts. 
(i) Recovery of loans, (ii) Corporation tax, (iii) Dividend on investment made by govt. (iv) Sale of public sector undertaking.

Define a tax.    

Distinguish between Direct and Indirect taxes.
or
What is the basis of classifying taxes into direct tax and indirect tax? Give an example of each. 

Classify the following into direct and indirect tax. Give reasons.
(i) Wealth tax, (ii) Entertainment tax, and (iii) Income tax. 

What is meant by Budget (Government) Expenditure? Describe its components (items).

Distinguish between revenue expenditure and capital expenditure.
or
What is the basis of classifying government expenditure into revenue expenditure and capital expenditure? 

Why are subsidies treated as revenue expenditure?