4 Main Economic Classifications of Capital Expenditure


December 14, 2018 admin 0 Comment

Economic classification of the budget has six accounts covering the following:

Account 1:

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Transactions in commodities and services, and transfers; Current Account of Government Administration.

Account 2:

Transactions in commodities and services and transfers; Current Account of Departmental Commercial Undertakings.

Account 3:

Transactions in commodities and services and transfers; Capital Account of Government Administration and Departmental Commercial Undertakings (Combined).

Account 4:

Changes in financial assets; Capital Account of Government Administration and Departmental Commercial Undertakings. Account 5: Changes in financial liabilities; Capital Account of Government

Administration and Departmental Commercial Undertakings. Account 6 : Cash and Reconciliation Account of Government Administration and Departmental Commercial Undertakings.

This classification is designed in such a way that it can be linked with a system of national income and expenditure accounts, depicting the activities associated with the generation of national income and capital formation.

It, therefore, provides a breakdown of government expenditure into consumption and capital formation, and the impact which the government expenditure has upon the rest of the economy.

Furthermore, this classification also provides information concerning financial assets and liabilities, and is very helpful in assessing the changes in the composition and ownership of financial assets as also the borrowing and lending transactions of the government.



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