1. ESSENCE OF FINANCE
Finance is a historical category. They appeared simultaneously with the emergence of the state during the stratification of society into classes. The term finansia originated in the 13th – 15th centuries. in the trading cities of Italy and meant any cash payment. Subsequently, the term gained international distribution and began to be used as a concept associated with the system of monetary relations between the population and the state regarding the formation of state funds of funds. Thus, this term reflected, firstly, monetary relations between two entities, i.e. money acted as the material basis for the existence and functioning of finance (where there is no money, there can be no finance); secondly, the subjects had different rights in the process of these relations: one of them (the state) had special powers; thirdly, in the process of these relations, a national fund of funds was formed - the budget (hence, we can say that these relations were of a fund nature); fourthly, the regular flow of funds into the budget could not be ensured without giving taxes, fees and other payments a state-compulsory nature, which was achieved through the legal rule-making activities of the state and the creation of an appropriate fiscal apparatus.
These are the main features of finance. Using them, one can unmistakably distinguish finance from the entire set of monetary relations. For example, monetary relations arising between citizens and retail trade(even under state regulation retail prices), cannot be attributed to finance, since the state here regulates monetary relations using the civil law method, for which characteristic feature is the equality of subjects (equality of their rights and obligations) united by these relations.

Thus, finance is always a monetary relationship, but not every monetary relationship is always a financial relationship.
Based on the above, we can formulate a general definition of finance.
Finance represents economic relations associated with the formation, distribution and use of centralized and decentralized funds of funds in order to perform the functions and tasks of the state and ensure conditions for expanded reproduction.

Finance how scientific concept usually associated with those processes that appear on the surface of social life in various forms and are necessarily accompanied by the movement (cash or non-cash) of funds. Whether we are talking about the distribution of profits and the formation of funds for intra-economic purposes at enterprises, or the transfer tax payments in state budget revenues, or on depositing funds into extra-budgetary or charitable funds - in all these and similar financial transactions there is a movement of funds.
Although very noticeable, cash flow in itself does not reveal the essence of finance. To comprehend it, it is necessary to identify those common properties that characterize the internal nature of all financial phenomena - they are united by the underlying relationships between various participants social production, or social relations. These relations are production (economic) in nature, since they arise directly in social production.
Economic relations are extremely diverse: they arise at all stages of the reproduction process, at all levels of management, in all spheres of social activity. At the same time, homogeneous economic relations that characterize one of the aspects of social existence, being presented in a generalized abstract form, form an economic category. Finance, expressing production relations that actually exist in society, having an objective nature and specific public purpose, act as an economic category.

The financial system includes three main links: public finances, household finances and enterprise finances. Of these three links, the main one is enterprise finance, since the first two links are formed on their basis.
Public finance consists of two main elements: the state budget and extra-budgetary funds.
The state budget is the annual plan of income and expenditure of the state; it is money that allows the state to perform economic and social functions (and in Lately and political). The state budget consists of the government budget and local budgets (region, city, district, village council). Therefore, the approval of state budgets for the next year is always stormy. Governments are trying to infringe on the rights of regions, and the latter are trying to keep more funds at their disposal.
Outside budget funds represent those funds that are accumulated outside the state budget system and have a strictly designated purpose: pension fund, social insurance fund, etc.
The budget consists of two parts: revenue and expenditure. In countries with developed market economies, 80-90% of budget revenue is generated from taxes on enterprises and the population.
The rest comes from the use of state property, foreign economic activity. The structure of the budget expenditure includes expenses for socio-cultural needs (health care, education, social benefits etc.), expenses for the development of the national economy, defense, public administration.
In a socially oriented economy, taxation is based on the principles of mandatory payment, social justice and connections with the receipt of benefits.

Thus, financial relations cover two areas:
A) economic monetary relations associated with the formation and use monetary funds, accumulated in the state budget system and government off-budget funds;
B) economic monetary relations that mediate the circulation of decentralized monetary funds of enterprises.

The monetary nature of financial relations is an important feature of finance. Money is a prerequisite for the existence of finance. If there is no money, there can be no finance, because the latter is a social form conditioned by the existence of the former.
In this regard, it is unlawful to classify not only monetary, but also natural relationships as finance. The existence of natural duties in the era of feudalism, the collection of tribute by the slave state from its citizens and conquered peoples, the naturalization of social relations in conditions of disordered monetary circulation does not at all prove the natural nature of financial relationships. They talk about something else - the functioning of finance is possible only under certain conditions, the absence of which immediately narrows the scope of this category.
The emergence of financial relations always makes itself felt by the real movement of funds. The absence of such movement at the stages of production and consumption of the reproduction process indicates that they are not the place where finance arises.
Real movement money occurs at the second and third stages of the reproduction process - in distribution and exchange. However, the nature of the movement of value (in its monetary form) at these stages is different, which does not allow both of their sides to be attributed to the sphere of functioning of finance.
At the second stage, the movement of value in monetary form is carried out separately from the movement of goods and is characterized by its alienation (transition from the hands of some owners to the hands of others) or the targeted isolation of each part of the value (within one owner). In the third stage, the distributed value (in monetary form) is exchanged for commodity form, i.e. acts of purchase and sale are carried out. There is no alienation of value itself here; it only changes its form - from monetary to commodity.
At the third stage of the reproductive process, constantly occurring exchange transactions are served by two categories: firstly, by money as a universal equivalent, and secondly, by price. No other social instrument is required here anymore. Therefore, there is no place for finances in the exchange.

The area of ​​origin and functioning of finance is the second stage of the reproduction process, at which the value of the social product is distributed according to its intended purpose and business entities. Therefore, an important feature of finance as an economic category is the distributive nature of financial relations.
The distribution and redistribution of value through finance is necessarily accompanied by the movement of funds taking a specific form of financial resources; they are formed by business entities and the state through various types cash income, deductions and revenues, but are used for expanded reproduction, material incentives for workers, and satisfaction of social and other needs of society. Financial resources come forward material media financial relations. The ownership of financial resources by a specific business entity and the state makes it possible to separate them from the funds of the population and, in particular, to draw a line between finance and wages.

The use of financial resources is carried out mainly through special funds intended purpose, although a non-stock form of their use is also possible. Financial funds are an important part common system monetary funds operating in the national economy. The fund form of using financial resources is objectively predetermined by the needs of expanded reproduction and has some advantages over the non-fund form: it allows people’s needs to be more closely linked with economic opportunities society; ensures the concentration of resources on the main directions of development of social production; makes it possible to more fully link public, collective and personal interests and thus more actively influence production.

The most important feature of finance is that financial relations are always associated with the formation of cash income and savings, which take the form of financial resources.

2. FUNCTIONS OF FINANCE.
Finance is an integral part of monetary relations, therefore their role and significance depend on the place monetary relations occupy in economic relations. However, finance differs from money not only in content, but also in the functions performed, in which its essence is manifested. Functions refer to the “work” that finance does.
No one denies that finance is a set of monetary relations organized by the state, during which the formation and use of funds of funds is carried out. And to the question of what is the source of the formation of numerous funds at different levels, the answer, as a rule, is the same - gross domestic product. The process of GDP distribution can be carried out using financial instruments: norms, rates, tariffs, deductions, etc., established by the state.
If we talk about finance in general, then, apparently, we should assume that it performs two main functions: distribution and control. That part of finance that operates in the sphere material production and participates in the process of creating cash income and savings, performs not only distribution and control, but also the function of generating cash income (regulatory).

With the help of finance, the state distributes the social product not only in cash, but also in value. In this regard, it becomes possible and necessary to control the provision of cost and natural-material proportions in the process of expanded production.
By actively participating in the distribution and redistribution of national income, finance contributes to the transformation of the proportions that arose during the primary distribution of national income into the proportion of its use. The ultimate goal of the distribution and redistribution of national income and gross domestic product, accomplished with the help of finance, is to develop the productive forces, create market structures of the economy, strengthen the state, and ensure a high quality of life for the general population.
The control function of finance is closely related to the distribution function - this is, first of all, control over the ruble in the process of objectively existing monetary relations. It permeates the entire system of relations associated with both the movement of value and the change in forms of value, and represents cost control through the form of ownership. Since finance expresses relationships arising from real money turnover, then control of the ruble as a function of finance is only control of real money turnover.
Finance exercises control at all stages of the creation, distribution and use of the social product and national income. Their control function is manifested in all the diversity of economic activities of enterprises. Ruble control is carried out over production and non-production costs, the correspondence of these costs to income, the formation and use of fixed assets and working capital. It operates at all stages of the circulation of funds, during financing and lending, non-cash payments, in relations with the budget and other links financial system.
Object control function finance are financial indicators of the activities of enterprises, organizations, institutions.
One of the important tasks financial control– checking strict compliance with legislation on financial matters, timeliness and completeness of fulfillment of financial obligations to the budget system, tax service, banks, as well as mutual obligations of enterprises and organizations for settlements and payments.

The regulatory function is associated with government intervention through finance (government spending, taxes, loans) in the reproduction process. In order to regulate the economy and social relations financial and budget planning are also used, government regulation market valuable papers.
Although finance is a basic category, it is largely dependent on government policies.

3. INTERRELATION OF FINANCE
Finance, participating in the distribution and redistribution of the gross social product and national income, interacts with other cost (monetary) categories of distribution - price, credit, wages, insurance. These monetary categories also participate in the distribution process, as well as in other stages of the reproduction cycle. However, the extent and forms of their participation are not the same. Each of these categories occupies its own special place in the system of distribution and other reproductive relations, participating in its own unique ways and methods in the unified process of distribution of social product and national income.
Price acts as the initial category of value distribution, mediating the transition of the product of labor from a natural material form to a monetary form, and its movement from one owner to another based on acts of purchase and sale. In the process of distribution, price deviations from the value determined by socially necessary labor costs may arise, as a result of which some producers realize a higher value, while others realize a lower value. In this case, finance enters into the redistribution process with its own methods: they withdraw part of the value (for example, with the help of excise taxes, export or import taxes, customs duties) or transfer the lost part of the value through subventions (subsidies), budget or industry financing. It should be borne in mind that the deviation of prices from value can be deliberately set by the state when implementing price policies (regulated prices, socially low prices, prices determined by high demand - monopoly prices). In market conditions, free prices prevail, formed by the supply and demand of goods and services.
However, the action of price does not directly cause the formation of funds; it acts as an instrument of commodity production and circulation. The act of exchange is both a sale (for one) and a purchase (for another). With unequal sales of goods, the share of “t” decreases or increases, and with unequal purchases, the volume and proportion of “c” and “v” of the new product change. The price affects the size and structure of the compensation fund, and therefore the profit.
With the help of finance, the distribution process initiated by price is adjusted, taking into account the conditions for the movement of value specified by economic plans and proportions. If, with the help of prices, the overall revenue from the sale of products is formed, then financial distribution splits this revenue into target funds of funds intended for further use. Thus, financial distribution methods are more flexible and provide greater targeting in the process. The degree of breadth of distribution varies: if the price distributes only part of the value in the form of its deviation from socially necessary costs or deviation of the latter from individual costs, then finance redistributes the entire cost of the product.
Price plays a special role in determining the amount of depreciation charges. The gap between the initial and current prices of means of production determines
significant fluctuations in the depreciation fund. The price distortion of value inherent in production (based on unequal purchases) intensifies with unequal sales and causes an increase in redistribution relations at the stages of distribution and consumption.
Finance is closely related to wages. Salary fund (fund wages) in the sphere of material production is isolated from the proceeds from the sale of products with the help of finance. This fund can be formed depending on the volume of products produced. If the income category is used in business practice, the wage fund is formed in closer connection with the achieved financial results. Gross income* as the difference between income from product sales and cost includes cost savings and is therefore characterized as a complex financial concept, which unites in monetary terms all the efforts of an economic agency in terms of quantitative and qualitative results of activities. There is also price factor: in the case of the sale of products of improved quality, both savings in material costs and relative savings in the use of fixed capital, acting in the form of a decrease in the share of depreciation charges attributable to a larger quantitative volume of products, increase profit or income.
Outwardly, it seems that the price factor is not directly involved in determining the wage fund. But through the distribution of net income, its impact is obvious. IN market system the influence of price on the wage fund increases even more.
In the non-production sphere, the connection between finance and wages is especially clear, since the wage fund for workers in this sphere is formed largely from budget funds and is determined by the financial capabilities of the corresponding budget.
In all cases, wages, as an economic category, determine the correspondence of each worker’s share in the created product, that is, the boundaries of workers’ participation in distribution,
and finance forms the wage fund or wage fund.
Payment of labor is used at the consumption stage, that is, by paying for goods and services. At the same time, a certain part of it is mobilized by financial methods in the form of the population paying taxes and insurance contributions: by the credit method - in the form of deposits in banks, government bonds; by purchasing shares and other securities, holding lotteries.
At the same time, the scope and motives for action of the categories under consideration differ significantly. The action of finance is broader than wages, since finance distributes the entire social product, and wages distribute only the necessary product and part of the surplus. Remuneration is related to the action of one of them the most important factors production - work force, serves as a means of compensation for expended labor, and finance, in addition, with the means of production, through their direct formation. Remuneration stimulates the growth of its productivity, and finance affects all social production, activating its development through the system of the financial mechanism.
The interaction of finance with credit is very close. As in finance, in credit relations monetary funds, called loan funds, are formed and used for the purposes of long-term and short-term lending to business entities, the population, and the state.
Both categories are designed to create conditions for a normal, continuous circulation of funds in the public economy. The objects of the complex influence of these categories in the sphere of material production are production assets (capital). Finance and credit are the sources of formation capital investments and working capital. Financial methods, as a rule, satisfy the constant needs of economic authorities for cash, credit - temporary needs. In the future, the role of credit resources as a source of capital investment will increase.
Extension credit methods creates additional incentives for more efficient use of monetary resources, puts their expenditure under the constant control of banks, which increases the self-accounting responsibility of business entities for the results of production and financial activities. Non-repayable funding should be reduced.
The relationship between finance and credit is clearly visible in the processes of formation of financial and credit resources, where the action of both categories is mutually directed: with the help of finance, credit resources of banks are formed - funds of economic authorities, depreciation deductions, part of the proceeds from the sale of products to replenish working capital, which is not immediately allocated to the purchase of material resources and other funds. With the help of a loan, financial resources are formed: loans replenish the financial resources of economic entities until repayment; payments by banks to the budget from income based on the results of their activities and in a number of other cases; possible budget borrowings from banks to finance government expenses.
Thus, a certain interchangeability of both categories in meeting the needs of expanded reproduction can be traced.
However, there are certain differences between the categories under consideration. If finance distributes and redistributes the social product, then credit participates only in redistribution, continuing the distribution begun by finance. The object of the loan is only that part of the cost that is this moment is temporarily free, which allows it to be accumulated in a loan fund to meet the needs of economic entities and the population in need of funds.
A significant difference is the method of using accumulated funds: financing involves the allocation of funds free of charge and indefinitely, and lending - on the terms of repayment, urgency, and payment; The most important principle of credit is the material security of the loans issued.
Finance is closely related to the settlement system, since its functioning is based on mutual settlements between individual business entities. Calculations do not represent an economic category; they are a tool for the implementation of the mentioned categories. IN in this case The function of money is used as a medium of circulation and a means of payment. The timely execution of financial transactions, the formation of trust funds, and the unimpeded promotion of financial resources in the necessary areas depend on the clarity and organization of settlements.
Payments by economic entities in the sphere of material production for manufactured products, goods and services precede the action of finance and contribute to the subsequent implementation of financial relations. Specific indicators characterizing the state of payments in the sphere of material production are accounts receivable and accounts payable. The level of this debt affects financial condition economic authorities and depends on the state of contractual discipline and the solvency of consumers. The state of settlements in the national economy is currently unsatisfactory: the amount of non-payments on mutual settlements between economic entities and overdue debt on bank loans and wages are increasing. Failure to fulfill contractual obligations is a factor of financial instability and leads to unproductive expenses and loss of funds in the form of fines. This is a direct deduction from income and, ultimately, from the wage fund. Cash settlements are an important link in the implementation of commercial settlement and self-financing. Their normal functioning is an indispensable condition for the reproduction process and the action of value economic categories-prices, finance, credit, remuneration.

4. THE ROLE OF FINANCE AT THE PRESENT STAGE OF THE RK.

At present, the shortcomings of financial policy that are holding back the economic and social development our country. These include: the dogmatic (uncreative) nature of financial policy, its inability to quickly respond to the changing conditions of development of our state, to find the necessary ways to solve pressing problems; lack of strategic conceptual developments; carrying out partial, unfounded tactical measures aimed at short-term gain; separation of financial policy from the actual state of affairs in the national economy; violation of the most important requirement for proper financial management - living within your means; residual approach in determining financial base meeting the social needs of citizens.
The purpose of the financial policy concept developed in modern conditions, is to achieve more high level the life of the people on the basis of economic development, every possible increase in the efficiency of social production. Social orientation financial strategy manifests itself not only in finding opportunities to increase financial resources aimed at improving the well-being of the people, but also in a fundamentally new approach to main goal economic policy. The standard of living is now a value that determines the development of production, the direction and structure of the use of financial resources.
Great importance for economic recovery and expansion on this basis financial opportunities country has an attraction to its economy foreign investment. They can come in various forms. World experience proves the enormous effectiveness of foreign direct investment.
Satisfaction of certain needs is ensured only if financial resources are available. This means that financial policies are developed and implemented taking into account real financial capabilities. Costs can only increase if financial resources increase. At the same time, the emphasis is shifting from subsidizing consumption to financing production. All economic and financial policy measures are aimed at providing the population with the opportunity to increase their incomes, on the one hand, and creating favorable conditions for development entrepreneurial activity- with another.
In accordance with the fundamental changes in financial policy, the financial mechanism is being restructured. The purpose of restructuring the financial mechanism is to strengthen its impact on the efficiency of social production based on the development of market relations, to ensure increased efficiency in the use of financial resources. The restructuring of the financial mechanism is based on fundamentally new approaches to organizing financial relationships in the national economy, ensuring the full development of economic initiative and the responsibility of enterprises, organizations, and regions of the country for the final results of their work.
At market economy there is no need to use special financial methods to increase the interest of enterprises in the better use of production factors, and to strictly regulate them financial activities. Market competition forces enterprises to constantly worry about production efficiency, improving the quality of financial planning, and deepening on-farm financial control over the use of financial resources. At the same time, the importance increases financial regulation market relations on the part of the state. It is carried out through taxation of enterprise profits (through changes in rates, tax benefits, differentiation of objects of taxation), the introduction of additional taxes (for example, export and import tax, tax on other income, VAT), taxation of workers' income, financing targeted programs. The system of financial sanctions for violation of business contracts, quality
parameters of manufactured products, for non-compliance with protection requirements environment, sanitary standards and regulations. The state is strengthening sanctions for untimely and incomplete fulfillment of financial obligations to the budget and extra-budgetary funds, concealment of profits and other objects of taxation. Audit financial control is being widely developed.
In order to improve social services for the population, a new economic mechanism has been introduced in institutions and organizations social sphere. Financing of their needs from the budget is carried out on the basis of long-term stable standards, determined on the basis of social expenditures per capita or other indicators. Social sector institutions are given the right to provide paid services, engage in economic activity, independently manage the income received.
Fundamental changes have been made to the mechanism public finance. Formation of state budget revenues has been transferred to tax basis; The structure of budget expenditures and the system of budget financing have fundamentally changed. The system of extra-budgetary funds has become widespread.
The development of market relations, improvement of management methods have led to positive results in the field of organization and management of property and personal insurance: cooperative insurance is developing, joint-stock insurance companies are emerging; new types of insurance are being introduced; The ratio between compulsory and voluntary forms of insurance is changing. Improvement insurance mechanism aimed at providing quality service to policyholders and increasing the efficiency of the insurance business.

CONCLUSION.
As has been shown, the role of finance in efficient work The state economy is huge. The role of the state in the full functioning of finance and the financial system is great. Studying and revealing the essence of finance allows us to know where and for what taxes collected from enterprises and citizens are used, what are the causes and consequences of the budget deficit and how to overcome them, why do we need stock exchanges, whether unprofitable enterprises should be subsidized or whether bankruptcy proceedings should be carried out. It is necessary to continue studying the essence of finance and its interaction with other segments of the economy.
The presence of controversial issues necessitates further development of theoretical problems of the essence of finance. A deeper knowledge of the economic nature of finance and its inherent properties will make it possible to more actively develop ways to better use this category in business practice, to scientifically substantiate measures aimed at the financial recovery of the economy and the improvement of financial relationships in our country.
The smooth functioning of the state’s financial system depends on understanding the essence of finance. The coherence of the work of all its links and subsystems. In addition, a good knowledge of the financial sphere of activity is necessary for our country because it is experiencing today a deep economic and financial crisis. Without the clear functioning of the financial system, it is impossible to improve the economy and develop internal and external financial relations. It is necessary to improve the financial system for its smoother functioning.
It is important to emphasize here that the problems financial recovery Literally everyone is concerned now. After all, what is currently happening in financial sector is closely related to everyone's personal well-being. The amount of profit and taxes, deductions for social insurance and pensions, the price of shares and bonds, forms of investment in production and the social sphere, etc. – such issues are discussed today not only in government circles; they deeply concern each of us.

Financial business originated in ancient times. Already in the documents of Indian culture IV V. BC e. you can find information about tax benefits, provided to merchant seafarers, caravan owners, and all those who settled new lands. The emergence of finance was the result of the transition from a subsistence economy to regular commodity-money exchange and is associated with the development of the state and its needs for resources.

The term “finance” itself appeared much later. There are different points of view regarding its origin. Some authors claim that this term originated in XIII – XV centuries in the trading cities of Italy, others - that the concept of “finance” was introduced into use by the French scientist J. Bodin, who in 1577 published the work “Six Books on the Republic”.

The essence of finance

The idea of ​​finance as an economic category has changed. Initially, the concept of “finance” was considered only in relation to the formation and use of monetary funds to meet government needs. This economic category was later called “public finance,” which now includes state and local finance (local government finance).

With the development of large-scale commodity production, methods and methods of mobilization, distribution and use of funds between various participants in the reproduction process were improved.

The evolution of views on the essence of finance can be represented as follows. As for the definition, finance is interpreted:

In the world economic theory(economy) as a set of cost flows associated with the distribution and use of monetary resources;

IN political economy as economic relations in the process of creating and using funds of funds (most common among Russian economists).

There are narrow, expanded and broad understandings of the term “finance”. In a narrow sense, finance covers only budget processes and these include only state (public) finances.

An expanded understanding of the term means that finance covers only part of monetary relations. In Russian economic literature, this point of view prevailed until recently. So, for example, in Soviet period finances included: the state budget; finance of material production; finance of non-productive sphere. Since the 90s XX V. finance began to include: the budget system ( federal budget, budgets of the subjects of the Federation, local budgets); state extra-budgetary funds; state loan; insurance; finances of business entities.

In a broad sense, the term “finance” covers the movement of all value flows, including monetary ones, thus finance includes: public finances; credit system; finance of sectors of the reproduction process; household finance; secondary financial market; international finance.

Thus, almost all monetary relations in society, everything related to the movement of money, is classified as finance, and the concept of “country’s monetary economy” is identical to the concept of “finance”.

IN foreign countries, and now in Russia, any specialist associated with money is called a financier, just as all money, including the income of citizens, is called finance.

This understanding of finance is reflected in modern foreign dictionaries: Finance – an art, function, profession related to currency or money.

The condition for the emergence of finance is the presence of commodity-money relations in society. In the reproduction process, the movement of funds must mediate the movement of goods (Fig. 1.1).

Rice. 1.1. Movement of goods and funds

Financial relationships arise based on cash flow. Distinctive feature financial relations is their connection with the distribution and redistribution of the value of the social product between various entities, each of which claims to receive a share in the produced product in accordance with current legal norms or business customs.

An important feature of financial relations is that the process of distribution and redistribution of the value of the social product is accompanied by the creation of various funds of funds that have a specific purpose. Funds of funds created at the level of the state and local governments are called centralized, and funds of funds created at the level of business entities and households are called decentralized. The formation of cash funds is strictly regulated.

The following can be distinguished signs of finance:

Monetary nature of financial relations. Money is the material basis for the existence and functioning of finance (they always have a monetary form of expression);

Distributive nature of financial relations. The area of ​​origin and functioning of finance are the stages of the reproduction process at which distribution of the value of the social product according to its intended purpose and business entities, each of which must receive its share in the produced product;

Financial relations find their material embodiment in centralized and decentralized funds of funds.

As an economic category finance– these are economic relations in the process of which the formation, distribution and use of centralized and decentralized funds of funds takes place in order to fulfill the functions and tasks of the state, provide conditions for expanded reproduction, and meet the social needs of society.

Finance functions

The essence of finance is manifested primarily through distribution function. The distribution process carried out with the help of finance is complex and multifaceted. It is characterized by multi-stage nature, generating different types distribution – intra-farm, intra-industry, inter-industry, inter-territorial. Finance serves different stages of distribution of the value of a social product, participating in both primary distribution and redistribution. Financial method distribution covers different levels of economic management: federal, regional (at the level of constituent entities of the Federation), local (at the level of local governments).

In general, the distribution function of finance allows:

Create trust funds of funds at the level of the state, local governments, business entities, and the population;

Carry out distribution between production and non-production areas and social groups, as well as intra-farm, intra-industry, inter-industry, inter-territorial distribution.

Along with the distribution function, finance also has control function. The basis of the control function is the movement of financial resources. Based on the nature of their movement, society has the opportunity to know how the proportions develop in the distribution of funds. The information obtained allows us to assess the effectiveness and feasibility of the expenses incurred. So that the information reflects real situation affairs, it must be complete, timely and reliable.

The use of the control function of finance in practice allows for the implementation of financial control, which is the function of financial authorities.

Both functions of finance are connected - they act simultaneously: distribution cannot but be controlled and control without distribution is impossible.

Monetary relations realized through special funds are called financial.

Finance is an integral component of monetary relations, but not all monetary relations can be defined as financial. Finance cannot be identified with money, since they differ from them in content and functionality that they perform.

Finance is a kind of tool that is used for the distribution/redistribution of GDP, control over the creation and use of monetary funds. In order to understand the essence of finance, you need to study its main functions.

Finance functions

So, the essence of finance is manifested in the functions it performs:

• Distribution. This function is expressed in providing business entities with the financial resources they need. By collecting taxes, the state accumulates funds in the budget, which it subsequently directs to permit production and social problems, financing economic, scientific, technical and other programs. Through taxes, the state has the opportunity to redistribute part of the profits of companies and the income of individuals. These funds are used to finance production, the social sphere, and are invested in individual industries with long-term payback.
• Control. This function consists of strict state control of production, distribution and exchange. In particular, government bodies authorities monitor timely receipt financial resources at the disposal of business entities in need of financing, as well as the efficiency of using these funds.
• Stimulation. This function of finance is to create the necessary conditions for the accelerated pace of development of individual industries and sectors of the economy, and assistance in current social problems. Such conditions are created by changing tax rates, introduction/cancellation of certain taxes and other things. With the help of taxes, sanctions, and benefits, the state is trying to increase the number of jobs, investments in the growth and development of the production sector, and stimulate technical progress.
• Mobilization (fiscal function). Thanks to taxes, the state has the opportunity to seize part of the income of legal and individuals, accumulates them in the budget and uses them for maintenance government agencies, defense, non-production sphere (science, culture, etc.).

Public finance

It should be noted that public finances occupy a special place in the system of financial relationships. By withdrawing part of the income, both private and public sector, the state creates monetary funds without providing economic entities with a commodity analogue. Such relationships are free of charge and represent a relatively autonomous subsystem integrated into the system of financial relations.

A set of interconnected links in one chain that ensure the state implements its economic functions, forms the financial system. Its components:

• the country's state budget;
• local finance;
• finance of state-owned enterprises;
• specialized government funds.

The basis (core) of this system is the state budget (plan of state expenditures and revenues) - the largest centralized fund of funds at the disposal of the government. The structure of state budget revenues and expenditures is the main content of the budget plan and it determines the direction in which the state’s socio-economic policy will develop.

Summarizing all of the above, it can be noted that finance is the monetary relations that arise during the distribution (redistribution) of the value of the gross social product and a certain part of the national wealth. They arise due to the emergence of income from companies and the state and the direction of these incomes to provide for various public needs (material, social and others).

Lecture 1. Topic: The essence and functions of finance

1. The essence of finance

Finance expresses economic relations arising in connection with the formation, distribution and use of funds of funds. Funds can be centralized or decentralized. They are created to solve the problems of managing the state and its territorial bodies, including the subjects of the federation. These are mainly budget funds of funds. The financial system includes various areas of financial relations, in the process of which monetary funds and financial instruments are formed and used. In the structure of the financial system, two levels are usually distinguished: on the first - national and municipal finances, and on the second - the finances of business entities, firms (enterprises, organizations, corporations). The basis of the financial system is the financial resources of private and state enterprises and citizens.

The state accumulates not only the resources of the centralized budget system, but also the funds of extra-budgetary funds formed in accordance with legislative acts.

Financial relations cover the sphere of state centralized management and permeate the circulation of decentralized funds of the population and enterprises of various forms of ownership.

It should be emphasized that finance and money cannot be identified, since they perform different functions. Let us repeat that money is a universal equivalent, including in exchange transactions, and finance is a component of monetary relations, it is a tool for distributing and controlling the processes of formation and use of cash flows in various areas of activity.

So, finance expresses the monetary relations that arise within the budgetary system between budgetary and extra-budgetary organizations, between legal entities and individuals, as well as between taxpayers and links in the budgetary and extra-budgetary sphere.

Finance is an integral part of monetary relations, therefore their role and significance depend on the place monetary relations occupy in economic relations. However, finance differs from money not only in content, but also in the functions performed, in which its essence is manifested. Functions refer to the “work” that finance does.

Finance is a set of monetary relations organized by the state, during which the formation and use of funds of funds is carried out. Gross domestic product is the source of the formation of numerous funds at different levels. Distribution of GDP is possible with the help of financial instruments: norms, rates, tariffs, deductions, etc., established by the state.

Finance performs two main functions: distribution and control. Each financial transaction means the distribution of social product and national income and control over this distribution.

The material and technical basis of the production process at any enterprise is the main production assets. In a market economy, the initial formation of fixed assets, their functioning and expanded reproduction are carried out with the direct participation of finance, with the help of which funds for special purposes are formed and used, mediating the acquisition, operation and restoration of means of labor.

The initial formation of fixed assets at newly created enterprises occurs at the expense of fixed assets that are part of the authorized capital. Fixed assets – funds invested in fixed assets for production and non-production purposes. Based on physical characteristics, fixed assets are divided into: buildings, structures, transmission devices, machinery and equipment, vehicles, tools, production and household equipment, working and productive livestock, etc. The main production assets of enterprises undergo an economic cycle consisting of the following stages: wear and tear, depreciation, accumulation of funds for the complete restoration of fixed assets, their replacement through capital investments.

It is possible to regulate the socio-economic processes of a territory by influencing cash flows in the context of the transition to a market economy. The money market, which generates cash flows in a market economy, is the main regulator of these flows.

International Accounting Standards (IAS) define the concept of cash flows as follows: “Cash flows are the inflows and outflows of cash and cash equivalents.” Cash and cash equivalents are defined by IAS as follows: “Cash consists of cash on hand and demand deposits.” “Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash and which have an insignificant risk of changes in value.”

Currently, the need to integrate methodological approaches of financial management, business valuation theory and accounting is becoming increasingly obvious, because they reflect the same economic processes. And the purpose of financial management, and the purpose of business valuation, and the purpose of accounting is to form the appropriate prerequisites for making effective economic decisions. Consequently, both accounting and financial management should be based on unified, consistent methodological positions. Awareness of this need is especially important today, when the process of transforming accounting in accordance with International Accounting Standards is underway and there is an opportunity to take a fresh look at a number of methodological problems economic science. One of these problems is the use of the concept “ cash flow» when carrying out economic calculations, in particular, when analyzing investment projects and in the business valuation process.

2. Functions of finance

The distributive function of finance manifests itself in the distribution of national income, when the so-called basic or primary income is created. Their sum is equal to national income. Basic incomes are formed during the distribution of national income (NI) among participants in material production and are divided into two groups: 1) wages of workers, office workers, income of farmers, peasants employed in the sphere of material production; 2) income of enterprises in the sphere of material production.

However, primary incomes do not yet form public monetary funds sufficient for the development of priority sectors of the national economy, ensuring the country's defense capability, and satisfying the material and cultural needs of the population. Further distribution or redistribution of income is associated with intersectoral and territorial redistribution of funds in the interests of the most efficient and rational use of income and savings of enterprises and organizations and the redistribution of income between different social groups of the population.

As a result of redistribution, secondary, or non-productive incomes are formed. These include income received in non-productive sectors, taxes ( income tax from individuals, etc.). Secondary incomes serve to form the final proportions of the use of national income.

By actively participating in the distribution and redistribution of income, finance contributes to the transformation of the proportions that arose during the primary distribution of national income into the proportion of its final use. The income created during such redistribution must ensure correspondence between material and financial resources and, above all, between the size of monetary funds and their structure, on the one hand, and the volume and structure of means of production and consumer goods, on the other.

The redistribution of income in the Russian Federation occurs in the interests of structural restructuring of the national economy, the development of priority sectors of the economy (agriculture, transport, energy, conversion of military production) in favor of the least affluent segments of the population (pensioners, students, single and large mothers). Thus, the redistribution of income occurs between the production and non-production spheres of the national economy, sectors of material production, individual regions of the country, forms of ownership and social groups of the population.

The ultimate goal of the distribution and redistribution of income and GDP, accomplished with the help of finance, is to develop the productive forces, create market structures of the economy, strengthen the state, and ensure a high quality of life for the general population. At the same time, the role of finance is subordinated to the tasks of increasing the material interest of workers and teams of enterprises and organizations in improving financial and economic activities, achieving the best results at the lowest cost.

Control function of finance

Finance is a tool for the formation and use of monetary income and funds; they objectively reflect the course of the distribution process. The control function is manifested in control over the distribution of GDP among the relevant funds and its expenditure for its intended purpose.

In the context of the transition to market relations, financial control is aimed at providing finance for the development of public and private production, accelerating scientific and technological progress, and comprehensively improving the quality of work in all levels of the national economy. It covers production and non-production areas. Aimed at economic stimulation, rational and thrifty use of material, labor, financial resources and natural resources, reducing unproductive expenses and losses, curbing mismanagement and waste. Carrying out the function of control over finances, society knows how the proportions develop in the distribution of funds, how timely financial resources are available to various business entities, whether they are used economically and efficiently, etc.

One of the important tasks of financial control is checking strict compliance with legislation in the field of finance, timeliness and completeness of fulfillment of financial obligations to the budget system, tax service, banks, as well as mutual obligations for settlements and payments between enterprises and organizations.

The control function of finance is implemented through the multifaceted activities of financial authorities. Employees of the financial system and the tax service exercise financial control in the process of financial planning, during the execution of the revenue and expenditure parts of the budget system. In the conditions of development of market relations, the directions of control work, forms and methods of financial control are changing significantly. Distribution and control functions are two sides of the same thing economic process. Only in their unity and close interaction can finance manifest itself as a category of value distribution.

The instrument for implementing the control function of finance is financial information. It is contained in financial indicators available in accounting, statistical and operational reporting. Financial indicators allow you to see various aspects of the work of enterprises and evaluate the results of economic activity. Based on them, measures are taken to eliminate the identified negative aspects.

The control function, objectively inherent in finance, can be implemented with greater or less completeness, which is largely determined by the state of financial discipline in the national economy. Financial discipline is a mandatory procedure for all enterprises, organizations, institutions and officials to conduct financial management, comply with established norms and rules, and fulfill financial obligations.

Other finance functions

In addition to the distribution and control functions, finance also performs a regulatory function. This function is associated with government intervention through finance (public spending, taxes, public credit) in the reproduction process.

Some authors do not recognize the distribution function of finance, believing that it does not reflect their specificity. But supporters of the distribution function do not at all believe that it is generated by the very factors of the functioning of finance at the second stage of the reproduction process. On the contrary, they associate it with the specific social purpose of finance, emphasizing that no other category operating at the stage of value distribution is as “distributive” as finance. However, today the regulatory function of finance is poorly developed in Russia.

In market conditions, finance must perform a stabilizing function. Its content is to provide all economic entities and citizens with stable conditions in economic and social relations. Of particular importance in this regard is the question of the stability of financial legislation, since without this it is impossible to implement investment policy in the production sector on the part of private investors. Achieving stabilization is considered by the Government of the Russian Federation as a necessary condition for the transition of a market economy to socially oriented economic growth.

Abstract on the subject: Finance, money circulation and credit completed by: IV year student gr. 7212 Kirsanov E.A.

Moscow State Industrial University

Faculty: Economics, management and information technologies

Moscow, 2001

1. Introduction

Before we begin to reveal the essence of this topic, I would like to consider the basic concepts that relate to finance in general and directly to the topic “The Essence and Functions of Finance.”

FINANCE (from the French finances - money), a set of economic relations in the process of creating and using funds of money. They arose, i.e. finance, with regular commodity-money circulation with the development of the state and its needs for monetary resources. The state, through the financial system (state budget, local finance, enterprise finance), redistributes part of the national income in accordance with the goals of economic and social policy.

FINANCE - The totality of funds of the state, enterprise, as well as the system of their formation, distribution and use.

FINANCIAL SYSTEM - 1) totality various fields financial relations within a given country. Under socialism, the initial link of the financial system is the finances of socialist enterprises (associations) and sectors of the economy. 2) Totality financial institutions countries. In a broad sense, it also covers credit institutions.

FINANCIAL GROUPS are the largest financial and industrial associations, which are based on the union of several families or groups. Arose in the late 19th - early 20th centuries. In con. 80s There are about 30 financial groups in the USA, about 10 in the UK and France, and about 7 financial groups in Japan.

FINANCIAL REFORM - 1860s in Russia, transformation of the financial system: focusing government revenues in the State Treasury, centralization of financial control, publication of a list of state revenues and expenses, replacement of wine tax with excise duty, establishment State Bank.

Since this essay will discuss the essence and functions of finance, I would like to briefly talk about them.

ESSENCE is the internal content of an object, expressed in the unity of all its diverse properties and relationships.

FUNCTION (from the Latin functio - execution, implementation) - activity, duty, work; external manifestation of the properties of an object in a given system of relations (for example: the function of money, the function of finance).

2. The need for finance

Finance is one of the most important economic categories, reflecting economic relations in the process of creating and using money. Their emergence occurred during the transition from a subsistence economy to regular commodity-money exchange and was closely related to the development of the state and its needs for resources.

One of the main features of finance is its monetary form of expression and the reflection of financial relations in real cash flows.

The real movement of funds occurs at the second and third stages of the reproduction process - in distribution and exchange.

At the second stage, the movement of value in monetary form occurs separately from the movement of goods and is characterized by its alienation (transition from the hands of some owners to the hands of others) or the targeted separation (within one owner) of each part of the value. In the third stage, the distributed value (in monetary form) is exchanged for the commodity form. There is no alienation of value itself here.

Thus, at the second stage of reproduction there is a one-way movement of the monetary form of value, and at the third there is a two-way movement of values, one of which is in monetary form, and the other in commodity form.

Since at the third stage of the reproduction process there are constantly ongoing exchange transactions that do not require any social instrument, there is no place for finance here.

The area of ​​origin and functioning of finance is the second stage of the reproduction process, at which the value of the social product is distributed according to its intended purpose and business entities, each of which must receive its share in the produced product. Therefore, an important feature of finance as an economic category is the distributive nature of financial relations.

Finance differs significantly from other economic categories that operate at the stage of value distribution: credit, wages and prices.

The initial sphere of emergence of financial relations is the processes of primary distribution of the value of a social product, when this value breaks down into its constituent elements, and the formation of various forms of monetary income and savings occurs. Further redistribution of value between business entities and specification of its intended use also occurs on the basis of finance.

The distribution and redistribution of value through finance is necessarily accompanied by the movement of funds, which take a specific form of financial resources. They are formed by business entities and the state through various types of cash income, deductions and receipts, and are used for expanded reproduction, material incentives for workers, and satisfaction of social and other needs of society. Financial resources act as material carriers of financial relations, which makes it possible to distinguish finance from the general set of categories involved in cost distribution. This occurs regardless of the socio-economic formation, although the forms and methods by which financial resources are generated and used have changed depending on the change in the social nature of society.

The use of financial resources is carried out mainly through monetary funds for special purposes, although a non-fund form of their use is also possible. The advantages of the stock form include: the ability to more closely link the satisfaction of any need with economic opportunities, ensuring the concentration of resources on the main directions of development of social production, the ability to more fully link public, collective and personal interests.

Based on all of the above, we can give the following definition: finance is a monetary relationship that arises in the process of distribution and redistribution of the value of the gross social product and part of the national wealth in connection with the formation of monetary income and savings among business entities and the state, as well as their use for expanded reproduction , material incentives for workers, satisfaction of social and other needs of society.

The condition for the functioning of finance is the availability of money, and the reason for the emergence of finance is the need of business entities and the state for resources that support their activities.

Finance is indispensable because it makes it possible to adapt the proportions of production to the needs of consumption, ensuring in the economic sphere the satisfaction of constantly changing reproductive needs. This occurs through the formation of special-purpose monetary funds. The development of social needs leads to changes in the composition and structure of monetary (financial) funds created at the disposal of business entities.

With the help of public finance, the scale of social production is regulated in sectoral and territorial aspects, the environment is protected and other social needs are satisfied.

Finance is objectively necessary, as it is determined by the needs of social development. The state can, taking into account the objective need for financial relations, develop various shapes their uses: enter or cancel different kinds payments, change the forms of use of financial resources, etc. The state cannot create something that is not objectively prepared by the course of social development. It establishes only the forms of manifestation of objectively mature economic relations.

Without finance, it is impossible to ensure the individual and social circulation of production assets on an expanded basis, to regulate industry and territorial structure economy, stimulate the rapid implementation of scientific and technological achievements, and satisfy other social needs.

3. The essence of finance

Finance represents economic relations associated with the formation, distribution and use of centralized and decentralized funds of funds in order to perform the functions and tasks of the state and ensure conditions for expanded reproduction.

Centralized finance refers to economic relations associated with the formation and use of state funds accumulated in the state budget system and government extra-budgetary funds, under decentralized finance refers to the monetary relations that mediate the circulation of funds of enterprises.

Finance is an integral part of monetary relations, therefore their role and significance depend on the place monetary relations occupy in economic relations. However, not all monetary relations express financial relations.

Finance differs from money both in content and in the functions performed.

Money is a universal equivalent, with the help of which the labor costs of associated producers are primarily measured, and finance is an economic instrument for the distribution and redistribution of gross domestic product (GDP) and national income, an instrument for controlling the formation and use of funds of funds. Their main purpose is to ensure, through the formation of cash income and funds, not only the needs of the state and enterprises for funds, but also control over the expenditure of financial resources.