Question : Which of the following is true?
A) Fiscal deficit is financed from borrowings.
B) Recovery of loans is a revenue receipt.
Option 1: Only B
Option 2: Neither A nor B
Option 3: Both A and B
Option 4: Only A
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Correct Answer: Both A and B
Solution : The correct option is Both A and B .
When a government spends more money than it takes within a particular fiscal year, there is a fiscal deficit. The government frequently borrows money to close this deficit; these borrowings might come from domestic or foreign sources, bonds, or other debt-financing mechanisms.
In terms of government accounting, loan recovery is categorised as a revenue receipt. Repayments of loans made by people, companies, or other organisations to the government are recognised as revenue receipts and go towards the government's income for that fiscal year. This money may be used to lower fiscal deficits and pay for a range of government expenses.
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