There seems to be a fine line between public and private finance. While both of them seem to have little difference with each other, it all lies in what sector they are actually used. Public deals with government revenue and expenditures of the economy. Private, on the other hand, deals with the same thing only in the private sector.
Finance is everywhere, especially in the world of business. It is defined as the provision of money in times of need. Other terms also say that it is the acquisition of funds in a business as well as the money source whenever it’s needed.
Without finance, there won’t be any success in the field of business. That’s why it is vital for every business owner to keep their company up and running. As well as keeping a consistent capital amount to yield pleasing results from business operations.
Business Fund Sources
There are plenty of sources where we can get business funds, which are:
This is a short term loan source that is paid on an installment basis for the year. Creditors fund are often found in the main titles on the liabilities section of a balance sheet. Some example of creditor sources are as follows.
- Notes payable – This one came from the sale of goods, which is the supply of services or loan of funds that came from the financial institution. Most of the time, it is handled in document form such as promissory notes and the like.
- Mortgage – You probably know by know what mortgage is. But for those who don’t, it is a loan that came from the commercial or investment bank in exchange for your belongings as a means of security.
- Accounts payable – The accounts payable is a result of a supply of goods and services to the customers. Keep in mind that credit document is not needed for this kind of deal.
On the other hand, we have the owners investment as the source of business fund. An owner’s investment can be found in the section of the Balance sheet where various business organizations are listed.
- Sole Tradership – This is an invested amount by the owner, which can increase or decrease depending on how it’s handled.
- Partnership – Sole traders are somewhat similar to partnership. But the difference is that partnership has the profit distributed among a curated list of partners. And if an unexpected loss happens, the partners also bear the same weight of the burden as well, hence being named ‘partnership.’
Differentiating Public and Private Finance
- Public – related to a one-year time period
- Private – daily, weekly, and even monthly budget.
Income vs. Expenditure
- Public – revenue follows the expenditure.
- Private – finance expenditure follows revenue.
- Public – the Government has the power to issue new notes.
- Private – anyone doesn’t have the power or authority to issue new notes.
Nature of Budget
- Public – the deficit is appreciable.
- Private – surplus budget is appreciable.
- Public – the Government is able to take compulsory loans from different financial sources
- Private – no one has the power to do so.
- Public – there was no secrecy as the Government has the option to publicize the budget on TV or social media.
- Private – it was kept to be secret as possible.
Nature of Projects
- Public – concern with major changes.
- Private – only concern on minor changes.
- Public – finances are a written document.
- Private – it is not a written document.
- Public – both Government revenue and expenditure are checked by an auditor or audit system.
- Private – there is no audit system.
- Public – the Government can request from foreign countries for financial assistance.
- Private – No.
Direct or Indirect Source of Income
- Public – thesource of income can be indirect such as various taxes
- Private – thesource of income is direct.
- Public – the Government can take/request a prior sanction with the cabinet, senate, and other political areas.
- Private – no need to get a prior sanction.
- Public – long term planning is absent here.
- Private – short term planning is the priority.
Use of Financial Resources
- Public – the main priority is the social welfare of the people living in the country.
- Private – fund sources are only used for personal satisfaction.
Record of Finance
- Public – the Government doesn’t have the ability to keep the record of finances.
- Private – the Government can permanently keep the record of its finance.