Question
Distinguish between ownership capital and borrowed capital.
| Points of difference | Ownership capital | Borrowed capital |
| Meaning | A fund invested by shareholder is called owner’s funds. | Funds borrowed from sources other than owner’s fund are called borrowed funds. |
| Source | Can be obtained through equity and preference shares, retained earnings, depreciation fund and reserves. | Can be obtained through debentures, commercial banks, financial institutions, etc. |
| Mode of returning | As dividends | As interest at a fix rate. |
| Rate of return | Rate of return is not fixed | Rate of return is fixed |
| Repayment of capital | Owner’s fund is repaid at the end i.e. after all the debts are paid. | Borrowed funds are debts and so they are to be returned before owner’s funds. |
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