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What is the difference between owner fund and borrowed fund |
| Answer» \tPoints of differencesOwner’s CapitalBorrowed FundsMeaningThe fund invested by the owner as well as an accumulated profit of the business is known as the owner’s fund.Any loan or credit taken by the business unit from other financial institutions is called a borrowed fund.Time periodThe owner’s contribution to capital is permanent in nature.It is fixed according to time limit i.e. borrowed for 6 months, 1 year or more.Sources of FundsShare capital retained earning: Global Depository Receipt, An American depositary receipt.Trade credit, Debentures, Public deposits, The loan from commercial banksReturn policy\xa0There is no right of the owner to get a regular return.\xa0Borrowed fund holder has a right to get a regular return.Risk\xa0Owner fund security holder has a primary risk.Borrowed fund holders bear no risk.\xa0Control\xa0The owner is having a full right to control all business activities.\xa0Borrowed fund security holder has no right to control the business activities.\xa0Security\xa0The owner’s fund needs no security.Generally, business units get a loan or borrow money against the security of assets.\t | |