Which of the following is NOT a capital expenditure?

The correct answer is Subsidies payment.

Key Points

• A subsidy is a benefit provided to a person, company, or institution, typically by the government.
• It can be either direct subsidies (like cash payments) or indirect subsidies (such as tax breaks).
• A government payment made directly or indirectly to people or businesses is known as a subsidy.
• According to economic theory, subsidies can be used to counteract market failures and boost economic efficiency.
• Loans and advances by the central government, expenditures on the acquisition of land, and investment in shares are all capital expenditures.

Additional Information

• Government capital expenditures are funds used to develop buildings, machinery, equipment, educational and healthcare facilities, etc.
• It covers the costs incurred by the government to make investments that will yield earnings or dividends in the future and to acquire fixed assets like land.  Repaying a debt is a capital expenditure because it reduces obligation in addition to creating assets.
• By enhancing production facilities and increasing operational effectiveness, capital expenditures that result in the formation of assets are long-term in nature and enable the economy to create income for many years.
• Additionally, it raises labour force participation, assesses the state of the economy, and increases its potential for future growth.