s.

no Public Finance Private Finance

1 Income and Expenditure Adjustment
In public Finance Expenditures determine income of the state. In case of private Finance every individual tries to
The state first estimates his expenditures and tries to raise adjust his Expenditures according to his income. He
income from various sources. 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 funds
income sources (i.e. taxes, fees, surcharges, internal/external from himself. He can borrow funds only from
dept) 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 marginal In the case of Private finance an individual attaches
utility but sometimes it has to spend money without following more important to the law of EMU to have maximum
this principle in the interest of the welfare of community. satisfaction
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. can In private finance normally individuals cannot make
adjust and change its income and expenditure policy. changes in their income & expenditure policies.
8 Difference of objective
There is fundamental difference in the objective of Public and In private finance a person is always guided by the
private finance. The objective of public finance is social profit motive and tries to increase his income and
benefit and not for profit. wealth for personal benefit
9 Element of force
In public finance govt can collect the revenue by imposing In private finance an individual doest have any such
law & no tax payer can refuse payment force to collect money
10 Present & Future income
In public finance the state is considered as the trustee for For the individual, the present is more valuable than
future. It spends the money keeping the future goals. For the future.
example : investment in education, health are long run project
and their burden is imposed upon present generation.
11 Solve and See
In Public finance government is solvent In private individual can be declared insolvent. If
their liabilities exceed their assets
12 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