Every Government has to perform different functions and for this purpose it requires funds. These funds however are contributed by the every citizen of the country. The contribution may be less or more but it is necessary. Thus Public Finance deals with “Why Government takes money how it gets money and where it spends money?”
Distinction between Public and Private Finance:
Individual and states are similar in that they
1) Both require resources
2) Both have to maximum results from their resources.
3) Both attempts to get the best out of all items of expenditure.
There are, however, some important differences between private and public finance: They are
State’s proposed expenditure determines its income.
Income determines its expenditure
A public authority can vary the amount of its income and expenditure within limits
An individual can not change his income and expenses easily.
A state is always repay its funds to people in services and does not save the funds.
After meeting the needs, individual prefers for saving the income.
State budgets are generally for one year
For individual there is no fixed period of time. The income expenditure is continuous.
The state budget is public
It is kept a secret.
State can issue paper Currency to meet its Expenditure.
It is not possible for individual