Public finance and private finance

Public finance and private finance

Similarities

a)The resources are limited for both public and private finance.

b)Both public and private finance has same motive of satisfaction to human wants.

c) Marginal utilities of expenditure of both public and private finance are equal.

d)Both public and private authorities have to borrow when they are short of income.

e)Both the finances require efficiency management and administration.

f)Both public and private finance tries to secure maximum advantage .

g)Income is not fixed in both the cases of public as well as private finance.

h)Both the finances face the problem of adjustment of income and expenditure.

I)Both the finances are required to repay their loans.

j)The financial activities of both public and private finance give birth to saving,capital accumulation, investment activities  by which consumption and investment activities are boosted in economy and thus contribute to National product.

k) Both the finances make use of labour and capital to satisfy demand.

Differences

Private finance is concerned with the income and expenditure of an individual's person while public finance deals with the revenue and expenditure of public institutions.

a)Element of compulsion : An important feature of public finance is the element of compulsion which the government can impose on tax payers. On the other hand , there is no compulsion element.

b)Income and expenditure relation : In private finance, an individual adjusts his expenditure to his income but in public finance , a government plans to raise revenue according to planned expenditure.

c) Possibility of change : In public finance, a government can bring about discharge change in its income and expenditure which is not possible in private finance.

d) Possibility of loans: In public finance, a government has better possibilities of rising loans from within the country and from outside  but in private finance , it is merely impossible.

e)Deficit financing:The problem of deficit financing is difficult to overcome in private finance.In public finance , it is easy to overcome the problem by printing paper currency.

f)Public nature: The nature of public finance is an open book but the nature of private finance is generally kept as a secret.

g) Preferences between future and present : In public finance ,the authorities has to be farsighted and much considered about the present and future generations. In private finance , the individual has be concerned only about his present life.

h)Budgeting period : In public finance, an annual budget is prepared which consists of revenue account and capital account but in private finance, a monthly budget is prepared which consist of savings also.

i)Surplus budgeting : Surplus budget is useful only for private finance but it is criticized in the public finance.

j)Pre determined policy: In public finance , there is pre determined policy to overcome with the employment situation and promoting national welfare but no such policy is necessary in private finance.

k) Different motive : Private finance is used to obtain more profit whereas public finance us meant to promote national welfare.

l)Income scope:The scope of income is very wide in public finance including external and internal sources whereas the scope of income of private finance is narrow.

m)Income elasticity: The income of government is relatively elasticity I.e it can increase its income easily according to expenditure which is inelastic in case of private finance.

n)Impact on economy:The public finance has adequate impact on the Economy whereas the impact of private finance is negligible.

o) Organisation:Financial set up of government is much more extensive and complex that that of private finance.

p) Bankruptcy : An individual can go bankrupt I.e his assets may be more than his liability which is impossible in case of public finance.

q)Coercive method:Private finance cannot use Coercive method to raise his income whereas the public finance can use .