Distinguish between ownership capital a burrowed capital.

Question

1 Answer

answered Aug 23, 2022 by Ramesh nirvani (59.2k points)
selected Aug 23, 2022 by Taraknath Pal

Best answer

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.