Friday, 20 May 2011

What do you know about Public Finance and Difference it from the Private Finance

Public Finance :-
Public finance deal with the income and expenditure of the state. The study of public finance can be divided into four parts.
1. Public Revenue.
2. Public Expenditure.
3. Public Debt.
4. Budgeting.
Today modern states have to perform various types of function. It has also to promote the welfare of the people and to provide the full employment in the country. There are large number of problems, which the states are facing inflation over population, defense, economic crises and poverty are the most important issues of the present age.
Public finance is used as a tool by the state to reduce and control all these problems.

Difference Between Private and Public Finance :-

There is a great difference in private and public finance when we talk about its revenue and expenditure. On other hand the management of personal and private income to make certain expenditure is called private finance.
We can distinguish between two by the following facts :

1. Private Expenditure :-
Private authority / person spends the money according to his income. He lives with in his own resources. So he first of all looks to his pocket and then spends accordingly.

2. Public Expenditure Adjustment :-
While public authority adjust its income according the expenditure. It looks forward to expenditure and then increase or decrease the income accordingly.

3. State can Issue the Currency :-
A private person can not issue the currency while a state has authority to issue the currency to meet its expenditure.

4. Record Keeping :-
The state keeps the proper record of income and expenditure every year. While a private person continue earning and spending without keeping any record.

5. Budget Period :-
Government balances its budget during a one year while individuals do not have any specific period.

6. Deficit Financing Facility :-
Through the process of deficit financing Govt. can increase the supply of money to meet its expenditure while an individual can not avail this facility.

7. Difference in Objectives :-
The main objective of the public finance is increase the welfare of the people. While the individual have the objective of personal satisfaction.

8. Borrowing :-
The state can borrow the money from inside and outside the country while an individual can borrow from other persons.

9. Publishing of Budget :-
Budget is not secret document, it is published by the government. While an individual keeps secrecy about his income and expenditure.

10. Surplus Budget :-
If government prepares surplus budget, it is considered inefficient. On other hand if a man saves the money he is appreciated.

11. Changes in Public Finance :-
The government can bring a big changes in the income and expenditure of the state according the prevailing situation. But an individual can not bring a big change at the time of crises.

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