Question
Differentiate between ‛owner‘s funds‘ and ‛borrowed funds‘.
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BASIS
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Owned Capital
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Borrowed Capital
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Meaning
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Owned Capital refers to the Capital collected by issuing various types of shares.
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Borrowed capital refer to the capital collected by issuing debentures, bonds, taking loans from banks. etc.
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Status
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It is ownership or owned capital.
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It is debt or owned capital.
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Nature
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It is the permanent capital, as the company is not under obligation to repay the amount during its lifetime.
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it is necessary temporary capital as it is to be repaid after fixed period of them.
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Mention
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It is mentioned in capital clause of memorandum of Association.
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It is not mentioned in Memorandum of Association.
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Consideration
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Return on capital is paid in the form of dividend.
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Return of capital is paid in the form of interest.
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Liability
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It is not a liability for a company.
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It is a liability for a company.
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