Finance is an economic relationship associated with the accumulation, distribution and use of centralized and decentralized funds of funds in order to fulfill the state's functions and the task of providing conditions for expanded reproduction.
Consequently, the financial activity of the state is the activity of the state in the formation, distribution and use of centralized and decentralized funds of funds that ensure its uninterrupted functioning and development.
Centralized finance is understood as economic relations associated with the formation and use of funds of funds accumulated in the state budget system and government extra-budgetary funds.
In other words, centralized funds of funds, or centralized finance, include those funds of the state that come at its disposal as a ruling entity. These funds include: firstly, funds accumulated in the state budget system; secondly, off-budget centralized funds of the state; thirdly, state insurance; fourthly, state, including banking, credit.
Under decentralized finance understand the monetary relations that mediate the circulation of cash funds of enterprises. That is, decentralized finance includes the finances of enterprises and organizations of all forms of ownership, formed both at the expense of their own resources and budget allocations, as well as sectoral and intersectoral off-budget funds.
Finances are an integral part of monetary relations, therefore the role and importance of finances depend primarily on the place that monetary relations occupy in economic relations.
Finance is an economic tool for the distribution and redistribution of gross domestic product (GDP) and national income, it is an instrument of control over the formation and use of cash funds.
The main thing purpose finance - through the formation of cash income and funds to ensure not only the needs of the state and enterprises in cash, but also control over the expenditure of financial resources.
Finance expresses monetary relations arising between the following subjects:
- enterprises in the process of acquiring inventory items, selling products and services;
- enterprises and higher organizations in the creation of centralized funds of funds and their distribution;
- the state and citizens when they make taxes and voluntary payments;
- enterprises, citizens and extra-budgetary funds when making payments and receiving resources;
- separate links of the budget system;
- insurance organizations, enterprises and the population when paying insurance premiums and indemnifying for damages.
Finance also expresses monetary relations that mediate the circulation of enterprise funds.
The role of the state in the accumulation, regulation, distribution and use of centralized and decentralized funds especially increases in the transition period to a market economy system. As for centralized funds, in relation to them the state acts as a ruling entity and can provide its income through a coercive system - taxes, duties, various fees, money emission, etc.
Another thing - decentralized funds. In relation to them, state regulation is expressed in a completely different way. And there should be a completely different attitude towards the finances of private entrepreneurs, since private finances - their condition and dynamics - are subject to the laws of a market economy.
Any financial activity of the state is connected with expenses and incomes. In the case when expenses exceed income, the state is forced to look for additional sources of funds to cover the necessary expenses - a bank or state loan, issuance of securities, etc. Therefore, it is the state of finance that reflects the processes taking place in the state, and not only in the field of economics and social processes, but in the areas of politics, demography, ecology, etc.
Without the redistribution of financial resources, it is impossible to hold almost any event in the state. In other words, the holding of any events in the state is associated with its financial activities. And that is why those legal bases are needed that would regulate the conduct of the financial activities of the state, since it is carried out, of course, in a legal form.
Without the participation of finance, the national income, which is the main material source of cash income and funds, cannot be distributed. Taking into account the volumes of the national income and its individual parts - the consumption fund and the accumulation fund - the proportions of the development of the economy and its structure are determined. Finances, influencing production, distribution and consumption, are objective.
As already mentioned, the state of finance reflects and determines the state of the country's economy.
Main condition for the growth of financial resources- an increase in national income. Finance and financial resources are not identical concepts. By themselves, financial resources do not determine the essence of finance, do not reveal their internal content and social purpose. Finance largely depends on the financial policy of the state. The essence of finance is manifested in their functions. Let's name four functions of finance: distributive, control, regulatory and stabilization, and characterize each of them separately. 
The main functions of finance are two: distribution and control, which are carried out by finance at the same time. And this is natural, since each financial transaction means the distribution of the social product and national income and control over this distribution.
distribution function finance means their participation in the distribution of national income, which consists in the creation of the so-called basic, or primary, income. Their sum is equal to the national income. The main incomes are formed during the distribution of national income among the participants in material production and are divided into two groups:
- wages of workers and employees, incomes of farmers, peasants;
- income of enterprises in the sphere of material production.
Further redistribution of national income is connected with:
- with intersectoral and territorial redistribution of funds in the interests of efficient and rational use of income and savings of enterprises and organizations;
- with the presence of not only a production, but also a non-production sphere in which national income is not created (health care, education, social insurance and social security, management);
- with the redistribution of income between different social groups of the population. As a result, secondary, or derivative incomes, incomes received in non-production sectors, taxes are formed.
Therefore, the redistribution of national income occurs between:
- production and non-production spheres of the national economy;
- branches of material production;
- certain regions of the country;
- forms of ownership;
- social groups of the population.
The ultimate goal of the distribution and redistribution of national income and GDP, accomplished with the help of finance, is the development of productive forces, the creation of market structures of the economy, the strengthening of the state, and the provision of a high standard of living for the general population. The role of finance is subordinated to the tasks of increasing the material interest of the collectives of enterprises and organizations, as well as employees in improving financial and economic activities, achieving high results at the lowest cost.
control function. Finance, being a tool for the accumulation and use of cash income and funds, objectively reflects the process of distribution and redistribution of national income and GDP for the relevant funds, controls their spending for the intended purpose.
Financial control in the transition to market relations is aimed at ensuring the dynamic development of public and private production, accelerating scientific and technological progress, and improving the quality of work in all sectors of the national economy. Financial control covers both production and non-production areas. It covers the whole complex of those economic relations on which the size of funds of funds and the efficiency of their use depend.
Financial control- an important means of ensuring the legality of financial and economic activities. Called to prevent financial and economic crimes, it stands guard over the inventory and money of the state. Financial control is of particular importance at the present time, when the tendency for the growth of "white-collar" economic crime is very clearly manifested.
Thus, financial control is the activity of state, municipal, public and other economic entities regulated by law to verify the timeliness and accuracy of financial planning, the validity and completeness of income receipts in the relevant funds of funds, the correctness and efficiency of their use.
In other words, the most important task of financial control is to verify the exact observance of legislation on financial matters, the timeliness and completeness of the fulfillment of financial obligations to the budget system, the tax service, banks, as well as the mutual obligations of enterprises and organizations for settlements and payments.
The control function of finance is also manifested through the activities of financial authorities. The effectiveness of financial control exercised by various entities, in particular, public authorities, local governments, auditors, audit firms, to a large extent depends on their interaction, coordination of joint activities, as well as cooperation with law enforcement agencies.
Regulating function finance is associated with state intervention through finance - public spending, taxes, public credit - in the process of reproduction. The state influences the reproductive process through the financing of individual enterprises and industries, social events and the implementation of tax policy.
stabilization function finance is to provide all economic entities and citizens with stable economic and social conditions. Finance should perform this function in the conditions of transition and development of market relations.
The functions of finance are implemented through a financial mechanism, which includes a set of organizational forms of financial relations in the national economy, the procedure for the formation and use of centralized and decentralized funds of funds, methods of financial planning, forms of financial and financial system management, financial legislation. Of particular importance is the factor of stability of financial legislation, since without this it is impossible to implement an investment policy.
One of the important elements of the financial mechanism is financial planning, which primarily refers to budget planning.
The Russian Federation is developing a long-term financial plan based on the budget for the current year. Its goals are the following:
- informing the legislative (representative) bodies about the expected medium-term trends in the development of the economy and the social sphere;
- complex forecasting of financial consequences of developed reforms, programs, laws;
- identification of the need for and possibility of implementing promising measures in the field of financial policy;
- tracking long-term negative trends for timely adoption of appropriate measures.
A long-term financial plan is developed for three years:
- 1st year - the year for which the budget is prepared;
- The 2nd and 3rd years are the planning period during which the real results of this economic policy can be traced.
The conditions for the emergence of finance are the formation, distribution and use of cash income, which consists of three functions: distribution, control and regulation.
distribution function
Responsible for providing financial resources for each link in the system. The main task is to distribute the national income in accordance with the needs of the state and the population. Income is generated from taxes and proceeds from the sale of goods and services.
The distribution of income allows:
- to evenly develop branches of the national economy;
- strengthen the state, economy and defense capability of the country;
- improve the standard of living of the population.
control function
Economic feasibility and compliance with current legislation are mandatory components of the control function. Control is necessary at all levels of the movement of finance and in any financial transaction. Financial control is a tool for the prevention of economic offenses, which allows:
- control the production of goods and services;
- monitor the process of spending resources;
- reduce costs and losses;
- prevent waste.
Regulating function
Regulation is aimed at improving the economic situation or overcoming the crisis. The main levers of regulation are tax and credit policy. Need government regulation:
- public sector;
- money turnover;
- public finance;
- foreign economic activity;
- economic security.
The essence of finance is manifested in their main functions:
* formation of monetary funds,
* distribution of national income,
* control over the distribution of national income.
These three functions are carried out by finance at the same time. Let's look at each of these functions in more detail.
The function of the formation of cash funds(income) algorithmically consists of the following stages:
* creation of a financial theory corresponding to the state of development of the state economy and aimed at ensuring economic growth,
* formation of a financial mechanism that ensures the collection of income,
* forecasting and planning of income, approval of budget income,
* accumulation of revenues to the budget and off-budget funds, the formation of budget funds to ensure the targeted functions of the state.
distribution function Finance manifests itself in the distribution of national income. When distributing the national income among the participants in production, primary (or main) incomes are formed:
* remuneration of workers employed in the sphere of production, income of enterprises in the sphere of production. However, only primary income cannot form public funds sufficient to ensure national security, develop priority sectors of the economy, and meet the material and cultural needs of citizens. Further redistribution of national income is needed:
* intersectoral and territorial redistribution in the interests of the most efficient and rational use of income and savings of organizations and individuals,
* redistribution of part of the income from the production sector to the non-productive sector (education, culture, health care, social insurance and social security, public administration, etc.),
* redistribution of income between different social groups of citizens of the country. As a result of this redistribution, secondary e(or derivative) income: income received in non-manufacturing sectors,
* taxes (for example, personal income tax), etc.
The redistribution of national income in the Russian Federation takes place in the process of structural restructuring of the national economy, the development of its priority sectors, as well as in favor of the poorest segments of the population.
Thus, the redistribution of income occurs between sectors of the economy, individual regions of the country, forms of ownership and social groups.
The ultimate goal of the distribution and redistribution of national income is to develop productive forces, strengthen the state, create market structures for the economy, and improve the social standard of living of citizens. At the same time, the role of finance is subordinated to the tasks of increasing the material interest of employees and collectives of enterprises in improving financial and economic activities, achieving the best results at the lowest cost.
control function Finance consists in control over the distribution of national income among the relevant funds, as well as over the expenditure of these funds for their intended purpose. Financial control in modern conditions is aimed at ensuring the development of public and private production, accelerating scientific and technological progress, improving the quality of work in all sectors of the national economy. It covers both the production and non-production sectors, is aimed at increasing economic incentives, rational and careful use of material, labor, financial resources and natural resources, reducing unproductive costs and losses, curbing mismanagement and
extravagance. The most important tasks of financial control are:
* verification of exact compliance with financial legislation, verification of the timeliness and completeness of the fulfillment of financial obligations to the budget system, tax authorities and banks,
* checking the timeliness and completeness of the fulfillment of mutual obligations of enterprises, organizations and individuals for settlements and payments.
The control function of finance is manifested in the multifaceted activities of financial authorities. Employees of the financial system and tax authorities exercise financial control in the process of financial planning, in the execution of the revenue and expenditure parts of the budget. In addition to the three functions we have detailed, finance can also perform regulatory function associated with the financial intervention of the state in the process of reproduction. Recall that, according to Keynesian economic theory, the main tool for regulating the economy is budgetary policy: the state through public spending, public loans, taxes can influence the employment of the labor force and the utilization of production capacities. In addition, a change in the ratio of consumption and savings is impossible without government intervention, since households' decisions to save and consume are influenced by a huge number of insignificant factors, as a result of which, in the absence of a state policy in the field of savings, the population's decisions to save will be dictated only by random factors. Meanwhile, the savings of the population can make up a significant part of the funds allocated for investments, including in more productive equipment, new types of products, etc. However, today the regulatory function of finance in the Russian Federation is not sufficiently developed.
LECTURE NOTES
Disciplines
STATE
AND MUNICIPAL FINANCE
Specialty 061000 - State and municipal administration
Compiled by G.V. Morunova
Cand. economy Sciences
Saint Petersburg
Topic 1. The concept, essence and functions of finance
Finance- a certain system of economic relations associated with the formation, distribution and use of centralized and decentralized funds of funds (of the state, organizations and other economic entities) in order to perform the functions and tasks of the state and local government and ensure conditions for expanded reproduction.
Cash- this is money that is at the complete disposal of economic entities and used by them freely, without special purpose and restrictions. cash funds- this is a separate part of the funds, having a special purpose and relative independence of functioning. Centralized monetary funds - funds formed and used by the state (budget, special purpose funds, off-budget funds) represented by its federal, regional and local authorities. decentralized monetary funds - funds created at the level of economic entities and citizens.
The main material source of funds is the national income of the country - the newly created value.
Finance- an integral part of monetary relations, but not all monetary relations are financial. Money is primary - finance is secondary.
Finance is different from money both in terms of content and functionality. Money is the universal equivalent by which, first of all, the labor costs of producers are measured, and finance- it is an economic tool for the distribution and redistribution of gross domestic product and national income, an instrument for controlling the formation and use of funds of funds.
Finance reflects the relationship of all legal business entities and households associated with the formation and movement of cash funds.
The criteria for classifying certain relations as financial are:
1. Real cash flow, i.e. transfer from one owner to another.
2. The distributive nature of these relations (the distribution of the value of GDP and income from foreign economic activity).
3. Place of occurrence - the second stage of the reproductive process (production, exchange, consumption).
In this way, with finance:
The cost of goods and services produced is distributed and the formation and use of cash income, receipts and savings from economic entities: households, organizations and the state, which are used to solve social and economic problems;
The redistribution of income and savings of past years is carried out through the budget system (taxes, loans, appropriations, subsidies, pensions) and through the financial market (issuance of securities, placement of shares, loans and loans, receipt of dividends, interest, insurance premiums and payments);
The reproduction process as a whole and its individual phases are quantitatively displayed (through stock exchange indices, farm profitability, budget revenues, public debt, budget deficit, etc.).
financial relations, expressing the continuous movement of value, circulate at all levels of the global economic system and are classified as follows (Fig. 1):
financial relations
Rice. 1. Classification of financial relations
Examples of financial relationships are relationships between:
Enterprises in the process of acquiring goods, selling products and services;
Enterprises and higher organizations in the creation of centralized funds of funds and their distribution;
The state and enterprises when they pay taxes to the budget system and finance expenses;
The state and citizens when they make taxes and voluntary payments;
Enterprises, citizens and extra-budgetary funds when making payments and receiving resources;
Separate links of the budget system;
Bodies of property and personal insurance, enterprises, the population in the payment of insurance premiums and compensation for damage, in the event of an insured event;
Monetary relations mediating the circulation of funds of enterprises.
Enterprises and banks (keeping own funds of enterprises in bank accounts, deposits, short-term and long-term lending);
Banks and the population (deposits of the population in Sberbank and other banks, the acquisition of bank certificates, the payment by banks to the population of income on deposits, certificates;
The above areas and industries and the shadow economy.
The material basis of financial relations are financial resources- as a set of incomes and receipts at the disposal of a business entity.
The sources of financial resources are:
At the level of business entities: profit, depreciation, sale of securities, bank credit, interest, dividends on securities issued by other issuers;
At the population level: wages, bonuses, wage supplements, social payments made by the employer, travel expenses; income from entrepreneurial activity, from participation in profits, from operations with personal property, from credit and financial operations; social transfers, including pensions, allowances, scholarships; consumer credit;
At the level of the state, local governments: income from state and municipal enterprises, income from the privatization of state and municipal property, income from foreign economic activity, tax income, state and municipal credit, issue of money and income from the issue of securities.
Financial resources are intended for:
Fulfillment of financial obligations;
Covering the costs of expanded reproduction;
Financial incentives for employees.
Generally, financial resources of states but add up from three sources:
1) funds accumulated in the state budget system;
2) funds from off-budget funds;
3) resources received by the enterprises themselves (profit, depreciation).
Functions of Finance
There are two main functions finance - distribution and control.
1. Distribution function finance is (Fig. 2):
1) in the creation of the so-called basic or primary income by distributing the national income among the participants in material production;
2) in the creation of secondary or derivative incomes through the redistribution of national income between the production and non-production spheres, branches of material production, regions of the country, forms of ownership and social groups of the population.
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Rice. 2. Distributive function of finance
The GDP created in society, minus the means of production consumed in the production process, undergoes primary distribution, the result of which is the formation of incomes for the main participants in the sphere of material production. There is a need to redistribute the created product, which is due to:
The presence, along with the production non-production sphere, in which a material product is not created (education, healthcare, defense, etc.);
Differentiation of incomes of various groups of the population, which is inevitable in a market economy;
The uneven development of individual territories and sectors of the economy.
As a result of redistribution, state revenues are formed; income received in non-production sectors; the population receives additional funds through social payments; territories and enterprises are additional resources for development.
Thus, secondary incomes form the final proportions of the use of the national income and play an important role in the balanced development of individual sectors of the economy and territories, ensuring a decent standard of living for the general population.
2. Control function consists in controlling the distribution of GDP among the relevant funds and their spending for the intended purpose by regulating financial information and stimulating the process of expanded reproduction.
The activities of all participants in financial relations, both at the micro and macro levels, are subject to financial control.
Financial control for private enterprises is associated with control in terms of the completeness and timeliness of tax payments, the correct reflection of the costs of production and sale of products, the formation and use of income from entrepreneurial activity. For the public sector, this is control over the targeted use of budgetary funds, the execution of cost estimates. For individuals, control is associated with the timeliness and completeness of paying taxes on income and property.
Financial control by public authorities is a verification of compliance with financial legislation in terms of the timeliness and completeness of the fulfillment by all business entities and citizens of obligations to the budget system, tax service, credit system, as well as mutual settlements and payments between enterprises and organizations.
Thus, financial control is aimed at increasing the efficiency of the use of budgetary funds, economic stimulation of entrepreneurial activity, rational use of material, natural, labor and financial resources at the disposal of society.
In addition to distributive and control functions, finance performs regulatory function, which manifests itself through the impact of the state on economic development (the behavior of economic entities, the development of individual territories and industries) through financial leverage. The main tools that are used for this are the following:
Taxes that can both reduce and stimulate entrepreneurial activity and private consumption;
Government spending that induces firms or employees to produce certain goods and services, as well as social payments that provide a certain level of income to certain segments of the population;
Regulation or control, through the adoption of appropriate laws, of certain types of economic activity, up to the prohibition of some of them;
Establishing marginal prices for certain goods and services (mainly in natural monopoly industries).
In the conditions of market relations, finance must also fulfill stabilizing function which is to ensure stable conditions in economic and social relations for all economic entities and citizens. Of particular importance in this case is the issue of the stability of financial legislation, since without this it is impossible to implement an investment policy in the production sector on the part of private investors.
Finance functions are carried out:
At all levels of management of the economic system (federal, territorial, local);
In all spheres of public life (material production, sphere of circulation, sphere of consumption);
At all levels of the economic system (intra-economic - finances of enterprises, intra-industry - finances of complexes, inter-sectoral and inter-territorial - the state budget and extra-budgetary funds).
For the emergence finance as a sphere of economic relations, the emergence and coincidence in time at a certain historical stage of a whole complex of conditions (or prerequisites) is necessary, such as:
- education and recognition of individuals for goods, services, land, etc.;
- the established system of legal norms in terms of property relations;
- strengthening the state as a spokesman for the interests of the whole society, acquiring the status of an owner by the state;
- the emergence of socially diverse groups of the population.
All these conditions arise under one common premise: a sufficiently high level of production, increasing its efficiency, growing and exceeding the limits necessary for biological survival.
The formation, distribution and use of cash income is the main condition for the emergence of finance.
Financial interests are the interests of the owners of cash income.
For the emergence of finance, a high level of development of the money economy is also necessary, a constant circulation of money on a large scale, the formation and use of the main functions of money. Financeis the movement of money. Financial relations always affect property relations. This is not only monetary relations, but also property relations. The subject of economic relations must always be the owner. It is by distributing and using the money income, of which he is the owner, that each participant in economic relations can realize his interests.
Financial resources
No serious economic or political decision can be made without a preliminary assessment of the amount of money income required for this. The distribution and accumulation of cash income acquire a target character. The concept of "financial resources" appears. Being money incomes accumulated and distributed for specific purposes, financial resources are used for various social, economic, scientific, cultural, political and other purposes (Fig. 18).
Financial resources- this is the accumulated income intended for specific needs.
Financial resources serve all stages of the movement of cash income from their formation to use.
Since finances are conditioned by the movement of cash income, the patterns of their movement affect finances. Incomes usually go through three stages (stages) in their circulation (Fig. 19):
Finance, as we see, is related to all stages of the formation, distribution and use of cash income. Primary Income are formed as a result of the sale and distribution of proceeds from the sale of goods and services. Since the production process, as a rule, is continuous, it is necessary to allocate part of the proceeds at the stage of selling goods to ensure the continuity of the production process.
primary income is formed as a result of expanded commodity production and is serviced by finance.
Primary distribution is the formation of primary income based on gross proceeds.
The secondary distribution of cash income (redistribution) can occur in several stages, that is, it is of a multiple nature.
As can be seen from the schematic representation of the abstract production process (Fig. 20), any production ends with the primary distribution of money income, without which further economic development is impossible. And the distribution of money income ( D") is financed. The allocation of financial resources for the expansion of production takes the following forms: payment of current material costs, depreciation of equipment, rent, interest on credit, wages of workers employed in this production. After the primary distribution of monetary income, the processes of redistribution begin, i.e., the formation of secondary income. First of all, these are taxes, contributions to insurance funds, contributions to social, cultural and other organizations.
Last stage distribution and redistribution of income - their implementation. Realizable income called final. Part of the final income may not be realized, but directed to accumulation and savings. Nevertheless, there is the following financial equality, which is not violated under any circumstances:
ΣA = ΣB + ΣC,
- A- primary income;
- V- final income;
- WITH- Savings and savings.
The distribution process is influenced not only by finances, but also by prices.
Since the process of realizing any goods (goods, services, etc.) into cash income is carried out at certain prices, then price dynamics has an independent effect on the distribution process. The more prices change (both upward and downward), the more money income fluctuates. These shifts are especially sharp in conditions of inflation.
Financial resources as part of cash income appear in various forms. For the real sector of the economy (production), this is part of the profit, for the state budget - the entire amount of its revenue, for the family - all the income of its members, etc.
Financial resources- this is the part of the funds that can be used by their owner for any purpose at his discretion.
The process of distribution and redistribution of financial resources
Financial resources are offered on the market by a large number of business entities and the population. It is clear that potential users (consumers) of these funds are not able to independently establish business relations with every economic entity, with every citizen. In this regard, the problem arises of combining disparate savings into significant amounts of financial resources that can be offered for use by a large potential investor.
This problem is solved financial intermediaries(banks, investment and mutual funds, investment companies, savings associations and
etc.), which accumulate free resources, primarily of the population, and pay interest on these resources. The attracted resources are provided by financial intermediaries as loans or placed in securities. Their income consists of the difference between the interest paid on the attracted resources and the interest received on the resources provided.
Owners of cash savings can transfer their funds to investment companies, or they can directly acquire industrial corporations. But in the second case, they will face intermediaries - dealers and brokers, which are professional participants in financial markets. Dealers carry out operations independently, on their own behalf; brokers act only on behalf of clients and on their behalf.
Timely financial market offers potential investors wide opportunities for investing funds by acquiring monetary obligations of a wide range of business entities. These liabilities are called financial instruments. These include: IOUs, futures contracts, etc. A variety of financial instruments allows owners of funds to diversify their investment portfolio, that is, invest their savings in the obligations of different companies and banks. These obligations will have a different yield, but also a different degree of riskiness. If a company fails, investments in other companies will continue. Diversification of the investment portfolio is carried out according to the principle: "you can not put all your eggs in one basket."
Financial relations as a sphere of economic activity
financial relations- these are relations associated with the distribution, redistribution and use of cash income.
The phenomenon of financial relations as a sphere of economic relations in society arises at the stage of distribution of primary income (Fig. 21).
Financial relations, arising in connection with monetary and serving the circulation of cash income, concern almost all individuals and legal entities. Main participants in financial relations are producers of any products (real sector of the economy); budgetary and non-profit organizations; the population, the state, banks and special credit and financial institutions. In the course of its development, financial relations give rise to credit and exist with them in close relationship (Fig. 22).
Credit relations is part of the financial relationship. Both of them are the result of monetary relations.
Credit relations arise in connection with the provision by one entity to another (individuals and / or legal entities) of money on the terms urgency, return, payment.
The main difference between financial and credit relations is the repayment of funds provided on the terms of urgency, repayment and payment.
Usually isolated three stages of income movement, reflecting the formation of primary, secondary and final income.
Primary Income are formed as a result of distribution (works, services). The amount of proceeds is divided into a compensation fund for material costs incurred in the production process (the cost of raw materials and materials, equipment, rent), the employee and the owner of the means of production. Thus, during the primary distribution, incomes of owners are formed. In addition, the following circumstance should be taken into account: indirect taxes established by the state are included in primary income. Therefore, at this stage, state revenues are partially formed.
At the second stage from primary income direct taxes are paid, insurance payments are paid, assistance is provided to the disabled. From the newly created funds of funds, in particular, from various levels of government, funds are paid, which are the costs of non-material workers, doctors, teachers, notaries, employees, military, etc.
As a result of this process, a new income structure is formed. It is made up of secondary incomes formed during the redistribution of primary incomes.
But doctors, teachers, employees, in turn, pay taxes and make insurance premiums. These taxes and contributions form funds earmarked for certain payments. These payments may generate tertiary income. It is almost impossible to trace the chain of their formation. The movement of these incomes is a very complex process.
The result of this process, its third and final stage, is the formation of final incomes. They are used to purchase goods and services. A certain part of the income is saved.
The amount of primary income for a certain period is necessarily equal to the sum of final income plus savings. The distribution and redistribution of income means the formation of their new structure. Moreover, this structure reflects economic relations (connections) between economic structures and the state.
At each stage of income generation, funds of funds, i.e. finances, are formed. Consequently, it is finance that mediates the processes of distribution and redistribution of income.
The result of the functioning of the financial system is a changed structure of income.
The distribution process of added(newly created) cost through is shown in Fig. 1. As can be seen from fig. 1, as a result of the distribution of the primary incomes of owners (entrepreneurs and workers), the incomes of workers in the non-material sphere are formed. However, it should be taken into account that in reality the distribution processes are much more complicated than it is shown in Fig. 1. Part of the income of workers in the material sphere is distributed in favor of workers in the non-material sphere directly through the consumption by the former of services provided by the latter. This is how the income of lawyers, notaries, security guards, etc. is formed. In turn, they pay taxes to the budgets involved in the subsequent redistribution of income.
Finance as monetary relations arise at the stage of distribution. But they are the most important link in everything and have a strong influence on it.
control function
control function consists in constant monitoring of the completeness, correctness and timeliness of receipt of income and the implementation of expenditures from all levels and. This function is manifested in any financial transaction. All these operations must not only be economically viable, but must also comply with applicable legal regulations. The control function of finance is expressed in the formation of funds of funds (budgets and off-budget funds) in accordance with the proclaimed goals and in accordance with the standards established by the legislative power. This function involves not only monitoring the processes taking place in the financial sector, but their timely adjustment in accordance with the norms of the current legislation.
The practical expression of the control function of finance is the system. This control ensures the validity of the formation of revenues of the budget system and the spending of budgets and extra-budgetary funds. Financial control is divided into preliminary, current and subsequent. Preliminary control is carried out at the stage of developing forecasts of budget revenues and expenditures and preparing draft budgets. Its purpose is to ensure the correctness of budget figures. Current control is responsible for the timeliness and completeness of the collection of planned revenues and the targeted spending of funds. Subsequent control is aimed at checking the reporting data about.
Stimulating function
Stimulating function finance is associated with the impact on the processes occurring in the real economy. Thus, during the formation of budget revenues, tax incentives for certain industries can be provided. The purpose of these incentives is to accelerate the rate of growth of technologically advanced products. In addition, the budgets provide for expenditures that can ensure the structural restructuring of the economy through financial support for science-intensive technologies and the most competitive industries.
Finance, understood in the broad sense of the word, includes all monetary funds, including loans. Therefore, credit relations are part of finance. is the movement of the loan fund.
You can also define a loan as a system of economic relations regarding the transfer of valuables (including money) from one owner to another for temporary use. Credit relations have their own specifics. The loan is associated with the transfer of the fund of funds for temporary use on the terms of repayment, urgency, payment, security. These conditions distinguish credit relations from other financial relations.
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