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Differentiate Between Private and Public Finance

Public finance focuses on raising income through taxes to fund government expenditures for social benefits, while private finance involves individuals adjusting expenditures to match income from personal sources. Some key differences include: public finance allows governments to borrow funds from various sources and print currency in emergencies, while private actors can only borrow externally; and public finance aims to benefit society rather than generate profit for individuals. Private budgets are also kept secret, while public budgets require transparency and auditing.

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Samad Raza Khan
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3K views

Differentiate Between Private and Public Finance

Public finance focuses on raising income through taxes to fund government expenditures for social benefits, while private finance involves individuals adjusting expenditures to match income from personal sources. Some key differences include: public finance allows governments to borrow funds from various sources and print currency in emergencies, while private actors can only borrow externally; and public finance aims to benefit society rather than generate profit for individuals. Private budgets are also kept secret, while public budgets require transparency and auditing.

Uploaded by

Samad Raza Khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Differentiate between Private and Public Finance

s.no Public Finance Private Finance


1 Income and Expenditure Adjustment
In public Finance Expenditures determine income of the In case of private Finance every individual tries to
state. The state first estimates his expenditures and tries to adjust his Expenditures according to his income.
raise income from various sources. He first determines his income and then spends the
money.
2 Nature of Borrowing
in case of public Finance the Government has a number of In Private Finance an Individual cannot borrow
income sources (i.e. taxes, fees, surcharges, funds from himself. He can borrow funds only
internal/external dept) from external sources
3 Printing of new Currency
The Government have right to print more currency when it In the case of Private finance it is not possible.
has hard pressure. i.e. during war, cyclone’s, floods during
other emergencies Govt. can print money.
4 Principle of Equal Marginal Utility
Although state tries to follow the principle of equal In the case of Private finance an individual
marginal utility but sometimes it has to spend money attaches more important to the law of EMU to
without following this principle in the interest of the have maximum satisfaction
welfare of community.
5 Difference in budget
Today all Govt’s are required to prepare budget which
states income and expenditure for particular year in
advance.
 Surplus budget is good for individual but it is not
consider for desirable for the state.
 The government if it has surplus budget means that
it has unnecessarily charges the taxes.
 Surplus budget indicates that the govt. is not
capable to spend the money for the welfare of the
people. Nowadays deficit budget is not considered
bad particularly during the period of recession and
depression. A deficit budget can meet the situation
created by recession or depression. A deficit
budget implies more expenditure on social
overheads or public projects as it creates more
purchasing power, in the hands of people and it
creates more demand for goods and services.
6 Secrecy of budget
In public finance the budget is an open document because In private finance individuals keep their budget
public finance is public and private finance is private. secret particular.

7 Elasticity of finance
Public finance is more elastic then private finance; govt. In private finance normally individuals cannot
can adjust and change its income and expenditure policy. make changes in their income & expenditure
policies.
7 Difference of objective
There is fundamental difference in the objective of Public In private finance a person is always guided by the
and private finance. The objective of public finance is profit motive and tries to increase his income and
social benefit and not for profit. wealth for personal benefit
8 Element of force
In public finance govt can collect the revenue by imposing In private finance an individual doest have any
law & no tax payer can refuse payment such force to collect money
9 Present & Future income
In public finance the state is considered as the trustee for For the individual, the present is more valuable
future. It spends the money keeping the future goals. For than the future.
example : investment in education, health are long run
project and their burden is imposed upon present
generation.
10 Solve and See
In Public finance government is solvent In private individual can be declared insolvent. If
their liabilities exceed their assets
11 Audit
In public finance taxes, public expenditure & public debts In the case of private finance there is no such audit
require audit report and accountability

 Read all content carefully by matching with your notes


 Check point for EMU of private finance
 Check heading no 7 I think there is some mistake in it

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