Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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What is the meaning of a negative PSNCR?

Public Sector Net Cash Requirement
Public Sector Net Debt Repayment
Indicates a budget surplus
Indicates a budget deficit

The correct answer is: Indicates a budget surplus

A negative Public Sector Net Cash Requirement (PSNCR) indicates that the government is receiving more cash from revenues than it is spending. This situation leads to a budget surplus, where government income surpasses expenditures. In such cases, the government can either reduce its debt or accumulate reserves. This financial indicator is important for assessing the fiscal health of a government, as a negative PSNCR demonstrates a capacity for positive cash flow and potentially suggests efficient budget management. It reflects a scenario where the government is not reliant on borrowing to sustain its spending, which can lead to greater financial stability in the long run. While other choices relate closely to government finance, they do not provide the same context for a negative PSNCR as a budget surplus does. Options that suggest debt repayment or deficits do not align with the implications of a negative PSNCR, making “indicates a budget surplus” the most accurate interpretation.