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Difficulty: MediumRecurrent and Capital Expenditure Classification

The Ministry of Agriculture of a state government recorded the following disbursements during the financial year:

- Payment of monthly salaries to agricultural extension officers: ₦3,500,000
- Construction of a modern irrigation dam: ₦25,000,000
- Purchase of fuel for daily official vehicle operations: ₦800,000
- Installation of a new solar-powered cold storage unit: ₦12,000,000

What is the total recurrent expenditure incurred by the ministry during the year?

  1. ₦4,300,000Answer
  2. B
    ₦16,300,000
  3. C
    ₦37,000,000
  4. D
    ₦41,300,000

Answer

The total recurrent expenditure incurred by the ministry is ₦4,300,000.
Recurrent expenditures in public sector accounting represent operational and administrative expenses incurred in the day-to-day running of government organs. In this scenario, staff salaries (₦3,500,000) and vehicle fuel (₦800,000) are regular operational costs. Adding these yields ₦4,300,000.

Step-by-Step Solution

1
Identify recurrent expenditure items
Monthly salaries (₦3,500,000) and fuel for daily operations (₦800,000) are operational running expenses.
Recurrent expenditures are routine, ongoing operational expenses that do not result in the creation of permanent fixed assets.
2
Identify and exclude capital expenditure items
Construction of an irrigation dam (₦25,000,000) and installation of a cold storage unit (₦12,000,000) are capital expenditures.
Capital expenditures are non-recurring outlays that acquire, construct, or enhance long-term assets of significant value.
3
Calculate total recurrent expenditure
₦3,500,000 + ₦800,000 = ₦4,300,000
Summing the identified operational items gives the final recurrent total.

Key Concept

Classification of Public Sector Recurrent and Capital Expenditures
Estimated Time:1m 15s
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Topics

Recurrent and Capital Expenditure Classification

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