The annual budget is full of technical terms that many of us find quite scary. But it is no different from a household budget that we all make.
Annual Financial Statement
This document describes the government's receipts and expenditures for a financial year. It is split into three parts— Consolidated Fund, Contingency Fund and Public Account. Each of them gives us a description of receipts and expenditure. Any expenditure to be made out of the Consolidated Fund and Contingency Fund requires parliamentary approval.
Any urgent or unforeseen expenditure is met by this Re. 500 crore fund, which lies at the President’s disposal. The amount withdrawn is returned from the Consolidated Fund of India later.
All receipts like taxes and expenditures e.g. salaries, subsidies and interest payments which do not result in sale or asset creation fallare part of the revenue account.
The Capital Account gives all receipts from liquidation (e.g. from sale of PSU shares) of assets and spending for asset creation (Giving loan for getting interest).
In this case, the government acts more like a banker or trustee, as it is a pool of money belonging to others such as Public Provident Fund.
The government's lifeline. All revenues, monies borrowed and receipts from the loans it has given, flow into this account. All government expenditure is also made out of this fund.
Revenue / Capital Budget
The government prepares a Revenue Budget (giving revenue receipts and revenue expenditure) and a Capital Budget (giving capital receipts and capital expenditure).
Revenue vs Capital
The budget divides all receipts and expenditures under two titles: revenue account and capital account. So all receipts in, say, the Consolidated Fund, are split into Revenue Budget (revenue account) and Capital Budget (capital account).