Difference Between Public Finance and Private Finance
Basis |
Public Finance |
Private Finance |
---|---|---|
Meaning |
Public finance is concerned with the expenditure and revenue of the government. |
Private Finance is considered with the expenditure and revenue of individuals and business firms. |
Nature of the Budget |
Government usually makes a deficit budget, i.e., where expenditure exceeds revenue. | Private entities usually make a surplus budget, i.e., where revenue exceeds expenditure. |
Objective |
The objective of public finance is to encourage social welfare and provide benefits to the general public | The objective of private finance is to only enhance the profit of the entities. |
Elasticity of Finance |
Public finance is more elastic as it has a scope of drastic changes. | Private finance is less elastic than public finance as there is not much scope for changes in it. |
Financial Transaction |
The financial transactions in this case are open and known to everyone. | The financial transactions in this case are kept a secret. |
Sources of Revenue |
The government has more sources for creating money, such as printing money and establishing laws to raise its revenue | Private entities have limited sources to generate revenue. |
Determination of Expenditure |
The government determines the amount of expenditure first and then searches for ways to generate income. | A private individual first evaluates his income before deciding how much money is needed to be spent. |
Right to Print Currency |
The government has complete authority over the currency. They can create, distribute and monitor the currency. | Private entities are not allowed to create currency. |
Effect on Economy |
Public Finance has a tremendous impact on the overall economic system. | Private Finance has little or negligible impact on the overall economic system. |
Differences in Credit Status |
In public finance, the government’s capacity for borrowing or public credit is unlimited. | In private finance, an individual’s credibility and borrowing capability are restricted. |
Time Horizon |
The time horizon of public finance is one year. | There is no fixed time horizon for private finance. |
Example |
Public Debt, Taxation, Public Spending, Monetary Policy, etc. | Mortgage and other loans, Insurance, Stock Market Investment, Personal Savings and Investments, etc. |
Difference between Public Finance and Private Finance
The specialised study of how an individual or a company manages its funds is known as Finance. It refers to the money required for carrying out business activities. It involves all activities right from the estimation of funds to their acquisition, utilisation, and disposal. Finance is the lifeblood of any business. It is mainly of two types: Public Finance and Private Finance where public finance is managed by the government and private finances are managed by the private sector.