Consider the following statements:I.Capital receipts create a liability or cause a reduction in the assets of the Government.II.Borrowings and disinvestment are capital receipts.III.Interest received on loans creates a liability of the Government.Which of the statements given above are correct?

1. A

   I and II only

   I and II only. Capital receipts create a liability or reduce assets; borrowings and disinvestment are capital receipts. Interest received is a revenue receipt, not a liability.

2. B

   II and III only

   II and III only. III fails, and I is dropped even though it is the definition.

3. C

   I and III only

   I and III only. III is false.

4. D

   I, II and III

   All three. III is the trap.

Summary. Official Set A key is (a) I and II only. A capital receipt either creates a liability (borrowing) or runs down an asset (disinvestment) — that is I, and II are examples. Interest received on loans is revenue income; it does not create a government liability (III fails). So I and II.