Examkin

Question

Difficulty: HardRecurrent and Capital Expenditure Classification

During a fiscal year, the Ministry of Transportation of a state government recorded the following financial disbursements:

- Construction of a modern bus terminal: ₦85,000,000₦85,000,000
- Routine servicing and minor repairs of fleet vehicles: ₦4,200,000₦4,200,000
- Payment of monthly salaries and allowances to ministry staff: ₦38,500,000₦38,500,000
- Major structural rehabilitation and capacity expansion of existing railway bridges: ₦52,000,000₦52,000,000
- Purchase of new traffic monitoring equipment: ₦19,800,000₦19,800,000
- Refueling of operational vehicles and office stationery supplies: ₦3,500,000₦3,500,000

What is the total recurrent expenditure (in ₦₦) of the Ministry for the fiscal year?

Answer: 46200000 ₦

Answer

The total recurrent expenditure of the Ministry for the fiscal year is ₦46,200,000.
Recurrent expenditures are ongoing operational expenses essential for daily administration, personnel payments, and regular asset maintenance. Adding routine servicing (₦4,200,000₦4,200,000), salaries (₦38,500,000₦38,500,000), and refueling/stationery (₦3,500,000₦3,500,000) gives ₦46,200,000₦46,200,000. Capital expenditures such as building new terminals, acquiring equipment, and major bridge expansions are excluded because they yield long-term physical assets.

Step-by-Step Solution

1
Classify each public sector expenditure item as either recurrent expenditure or capital expenditure.
Recurrent expenditures: Routine servicing (₦4,200,000₦4,200,000), staff salaries (₦38,500,000₦38,500,000), and refueling/stationery (₦3,500,000₦3,500,000). Capital expenditures: Bus terminal construction (₦85,000,000₦85,000,000), major bridge expansion (₦52,000,000₦52,000,000), and equipment acquisition (₦19,800,000₦19,800,000).
Recurrent expenditures represent operational costs consumed within the financial year, whereas capital expenditures create non-current assets or increase their long-term capacity/lifespan.
2
Sum the classified recurrent expenditure amounts to obtain the total.
Total Recurrent Expenditure = ₦4,200,000+₦38,500,000+₦3,500,000=₦46,200,000₦4,200,000 + ₦38,500,000 + ₦3,500,000 = ₦46,200,000.
Aggregating all operational and recurring personnel expenses provides the true total of public recurrent spending.

Key Concept

Public sector recurrent expenditure comprises regular operational running costs, staff salaries, administrative expenses, and routine maintenance of existing public infrastructure, whereas capital expenditure involves creating or expanding long-term physical assets.
Rate this question

Topics

Recurrent and Capital Expenditure Classification

More questions from this topic