Owned Capital and Borrowed Capital
Q.4 (i) Owned Capital and Borrowed Capital
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| Points | Owned Capital | Borrowed Capital |
|---|---|---|
| Meaning | Capital contributed by the owners (shareholders) of the company and retained earnings. | Capital raised by way of loans from outsiders such as debentureholders, depositors, banks and financial institutions. |
| Sources | Equity shares, preference shares, retained earnings (ploughing back of profits). | Debentures, bonds, public deposits, loans from banks and financial institutions. |
| Status of providers | Providers are owners of the company. | Providers are creditors of the company. |
| Return | Dividend, paid only out of profits; not compulsory. | Interest at a fixed rate, payable even in case of loss. |
| Repayment | Not repaid during the life of the company (except redeemable preference shares and buy-back). | Repaid after a fixed period as per the terms of borrowing. |
| Security | No security is required. | Usually secured by a charge on the assets of the company. |
| Control | Equity shareholders have voting rights and control over management. | Lenders have no voting rights or control. |
| Tax | Dividend is not a deductible expense. | Interest is a deductible expense, so it saves tax. |
Doubtly AI
· 28 Oct 2026
AI-verified · Oct 2026
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