Public finance
is composed of the following constituents public:
- ( financial ) administration
- expenditure
- revenue
- debt Based on Similar Theories
Private finance is the study of the
income, debt and expenditure of the individual or a private company or business
venture or an association. It includes the study of their own view regarding
earning expenditure and borrowing.
1.1.4 Similarities and Differences between Public
Finance and Private Finance
Despite the
differences in scope and nature of the public finance and private finance,
following are similarities.
A.
Similarities
The basis of public as well as private finance is the same. Both seek the
help of various principles of economics in determining various interrelated
problems. For example, a person wants to secure maximum utility on count of
minimum expenditure and government too wants to secure public utility by
spending the least possible amount of public money.
II.
Both Face
the Problem of Scarcity
Limitation of the resources is the problem before private as well as
public finance. Individuals’ resources are limited up to this earnings; past
savings and ancestral property similar governments’ resources also depend on
taxable capacity of the individuals earnings of the various corporations etc.
None of the two is capable of extending its expenditure beyond a certain limit;
hence non can afford to go to the infinity in the use of finance.
III.
Both Require
Efficient Administration
Private as well
as public finance require efficient administration to look after the various
acts of extravagance. In the event of the failure of an efficient
administration both might be compelled to face ‘dire-consequence’ in their financial
field, individual never wants any kind of wastage or misuse of his income, so
the government if it is alive to the sense of duty.
IV.
Both Borrow
and Must Repay
To run the administration of finance some times money in hand fails to
fulfill the requirements especially in the times of emergency, governments
borrow money from individuals and also borrow from different sources like
relatives, banks, at the same it is obligatory for both the public finance as
well as the private finance to repay the debt. The point here is that none can
live without repaying the amount.
V.
Both are
Based on Rationality of Thought
When an individual spends some money he makes it certain in his mind that
money is spent in the best way. He applies his rational faculties. In the same
way any irrational step taken by the government may bring wastage and misuse of
finance. This irrationality lead them to damages while rationality to
prosperity and achievement of goals.
B. Differences between Public Finance and
Private Finance
- Individual determines his expenditure on the basis of his income but government determines its income on the basis of its expenditure. As far as an individual is concerned he determines his expenditure on the basis of the income, in the sense that he cannot think of spending more than his income. He distributes the amount of income to be spent on various subjects with income at his finger tips. The position is quite contrary in the case of government. The government first decides the amount of expenditures to be done during a period of time, and then frames scheme to secure money to meet the expenditure. Government has the power to increase its income be internal borrowings but this is not possible for an individual.
- Government’s source of income is more flexible in comparison to private source. Government has legal power to extend the sources of its income according to the needs of the time. Government has the control over the whole national property but individual has to rely upon his own individual standing. Moreover, government can take the help of the foreignment and this is not possible for a person to secure such supports. The last resort available to the government is the printing of new currency notes to increase its income. But an individual will be definitely but behind the bars for such an office.
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