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Question

Difficulty: MediumSources of Government Revenue

Which of the following government receipts is credited directly to the Capital Development Fund rather than the Consolidated Revenue Fund?

  1. Proceeds from external loans raised specifically for infrastructure developmentAnswer
  2. B
    Mining royalties collected from oil and gas operating companies
  3. C
    Personal income tax deducted from civil servants under the PAYE system
  4. D
    Court fines and license renewal fees collected by government ministries

Answer

Proceeds from external loans raised specifically for infrastructure development
In public sector accounting, capital receipts such as external borrowings, internal loans, and capital grants intended for capital projects are credited into the Capital Development Fund (or Development Fund). Recurrent revenues (both tax and non-tax) go to the Consolidated Revenue Fund.

Step-by-Step Solution

1
Classify government revenues into recurrent revenue and capital receipts.
Tax revenue (PAYE), oil revenue (mining royalties), and non-tax fees/fines are recurrent receipts. Loan proceeds are capital receipts.
Recurrent receipts represent ongoing revenue generated from regular operational activities and statutory duties, whereas loans represent capital inflows intended for long-term development.
2
Determine the destination fund for capital receipts versus recurrent receipts in public sector accounting.
Recurrent receipts are credited to the Consolidated Revenue Fund, while loans and capital grants earmarked for capital projects are credited to the Capital Development Fund.
The Consolidated Revenue Fund receives all general recurrent revenues of the government, whereas the Capital Development Fund is specifically established to finance capital expenditure from capital receipts.

Key Concept

Distinction between the Consolidated Revenue Fund and the Capital Development Fund in Public Sector Accounting
Estimated Time:1m 0s
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Topics

Sources of Government Revenue

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