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 Form 4 Business Studies online lessons on public finance

Principles of public or government expenditure

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Answer Text:
PRINCIPLES OF PUBLIC/GOVERNMENT EXPENDITURE
These are the considerations that are necessary before any expenditure can be incurred by the government.
They include:
a) Sanctions: Every public expenditure must be approved by the relevant authority like parliament.
b) Maximum social benefit: Any public
expenditure must be incurred in such a way that majority of the citizens are able to reap maximum benefit from it e.g. improved living standards and quality of life.
c) Flexibility /elasticity-The policy on public expenditure should be flexible enough to meet prevailing economic situations i.e. it should be possible to increase or
decrease the expenditure on projects depending on the prevailing circumstances e.g. during drought, it should be possible to spend on famine relief.
d) Economy-public expenditure should be planned carefully and prudently to avoid any possible waste.
e) Proper financial management (Accountability)-public
funds should be well managed. This should be facilitated by maintenance of proper records which should be audited as required.
f) Equity-Government expenditure should be distributed equitably to all sectors of the economy in order to reduce income and wealth inequalities.


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