Question

difference between owners fund and borrowed fund

Answer 1

Owners fund refers the funds invested by the company owners for its development. Examples include equity and preference share capitals and retained earnings.

Borrowed fund refers to funds raised through borrowing and loans. These include loans from financial institutions. These funds must be repaid with an interest rate.

Answer 2

Owned funds refer to the funds provided by the owners. In a sole proprietorship, the proprietor himself provides the owned fund from his personal property. In a partnership firm, the funds contributed by partners as capital are called owned funds. In a joint stock company, funds raised through the issue of shares and reinvestment or earnings are the owned funds.

Borrowed funds refer to the borrowings of a business firm. In a company, borrowed funds consist of the finance raised from debenture holders, public deposits, financial institutions and commercial banks. Thus, the various sources of finance may be divided.