Difference between Owner’s Fund and Borrowed Fund
Owner’s Fund and Borrowed Fund are types of money that a business can use to grow and make money.
The Main difference is owner’s fund is the money that belongs to the business owners while Borrowed Fund is the money that the business borrows from others.
Before we move to the differences, let’s understand what are Owner’s Fund and Borrowed Fund:
- Owner’s Fund: Owner’s Fund, also called equity or capital, is the money that the owners of a business put into the company. It can come from the owners’ savings, investments, or profits they’ve made from the business.
- Borrowed Fund: Borrowed Fund, also called debt or loan, is the money that a business borrows from a bank or other lender. The business has to pay back this money, often with interest.
Now, let’s move to Owner’s Fund vs Borrowed Fund:
Major differences between Owner’s Fund and Borrowed Fund
| Owner’s Fund | Borrowed Fund |
|---|---|
| Owner’s Fund is the money that belongs to the business owners. | Borrowed Fund is the money that the business borrows from others. |
| Owner’s Fund is the money that the owners of a business put into the company. | Borrowed Fund is the money that the business borrows from a bank or other lender. |
| Owner’s Fund is not required to be paid back. | Borrowed Fund is required to be paid back, often with interest. |
| Owner’s Fund does not have strict repayment terms. | Borrowed Fund is have a set terms and time frame for repayment. |
| Owner’s Fund is based on trust and equity. | Borrowed Fund is based on creditworthiness. |
That’s it.
Note that sometimes, the question might also be asked as “distinguish between Owner’s Fund and Borrowed Fund”.
Also see:
- Difference between National Parties and Regional parties
- Difference between Human Capital and Human Development
- Difference between Branch Accounts and Departmental Accounts
Final words
Owner’s Fund and Borrowed Fund are both types of money that a business can use, but they are different in many ways.
Owner’s Fund is the money that belongs to the business owners and Borrowed Fund is the money that the business borrows from others. Each has its own benefits and drawbacks, and a smart business will use a combination of both to grow and be successful.
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