Economics: the essence of the concept
Currently, the term “economics” is used quite often in everyday life. But due to the nature of the term itself, confusion sometimes arises. The fact is that, having originated in the times of Ancient Greece, this term has somewhat changed its original meaning. Initially, this was the name for the art of housekeeping (housekeeping) or managing one's estate.
Later, when the formation of sciences began, the theoretical foundations of science and economic development were laid. The formation of economic theory began more actively in the era of the formation of capitalist relations. At the same time, the meaning of the term “economy” took shape in the sense of designating an economic complex. Therefore, today we are dealing with the dual meaning of the word “economy”:
- Economics is a social science that studies the features and patterns of development of processes of production, distribution and consumption of material and spiritual goods.
- An economy is a set of enterprises and institutions that are responsible for the production, exchange, sale, distribution and consumption of various goods and servicing these processes.
Economy serves as the material basis for the development of human society. After all, it is thanks to economic activity that goods are created to satisfy various human needs. Like any complex system, the economy has its own characteristics of organization and structure. The economy changes over time. The structure has both sectoral and spatial characteristics.
Territorial structure is the distribution (location) of enterprises across the territory of a country or region. The sectoral structure of the economy is its division into separate sectors.
Industries are associations of enterprises that produce approximately homogeneous products or perform similar operations.
Industries are distinguished relatively arbitrarily. Their number in the country’s economic complex and their share in the gross domestic product depends on many factors:
- natural conditions and resources;
- number and distribution of population;
- historical conditions;
- social processes both in the country itself and in neighboring countries;
- the level of economic development of the country and its neighbors.
Traditionally, the country’s economic complex is conventionally divided into several macro-sectors. And they, in turn, are divided into branches of a lower order. The largest macro-sectors are considered to be industry, agriculture, transport and communications, construction, and non-production spheres.
Concept of financial relations
An important component of the economy in general and its non-productive sphere in particular is finance. They are the basis for the functioning of the economy, the key to ensuring that the state fulfills its functions.
Definition 1
Finance refers to the movement of cash flows.
Finance is the result of the formation and development of monetary relations in a certain socio-economic situation.
The emergence and formation of finance is influenced by the following circumstances and conditions (factors):
- formation of the institution of ownership of resources, goods and services, means of production;
- formation of a system of legal and property relations in society;
- the role of the state in regulating social and economic relations;
- social stratification of society and the formation of social psychology and social consciousness;
- the size of the population's income.
It is the question of income that is one of the key issues in the formation of financial relations. Indeed, in the process of realizing their income, each member of society can achieve the fulfillment of their interests.
Definition 2
Financial relations are economic relations between business entities associated with the creation, distribution and application (use) of funds to meet the existing needs of these entities (individual citizens, organizations, enterprises and states).
The role of financial relations in the economy
Financial relations arise in the process of interaction of economic entities with each other in the course of business. Their character is determined by the dominant property rights in society and the nature of monetary relations. The main regulator of financial relations is the regulatory (legislative) framework formed and operating in a given state at a given time.
In other words, the formation and development of financial relations is influenced by the economic system dominant in a given society. Due to the wide variety of factors influencing the emergence and formation of financial relations, the role of money in society and the formation of public consciousness, there is a wide variety of types of financial relations.
Economists identify the following main groups:
- relations between independent economic entities of various forms of ownership on issues of formation and distribution of profit (income, revenue);
- relations between independent economic entities during transactions with securities (stocks, bonds, bills, etc.);
- relations between an enterprise and its employees;
- relations within the workforce based on employment contracts;
- relations of the main enterprise with subsidiaries and branches;
- relations of legal entities with the budget, extra-budgetary funds and fiscal authorities of the state;
- relations of business entities with credit and financial institutions (banks, investment and insurance companies, various funds).
Financial relations are derived from economic relations and are closely related to them. If economic relations were initially formed in the process of production of natural products, then the next step is the redistribution of these products. Commodity and money exchange is formed. Therefore, financial relations can be called redistributive. But for their emergence it is necessary to achieve a certain level of economic development (the emergence of money, a certain amount of volume of the product produced, public interest of the state in the direction and nature of cash flows). The stronger the role of the state, the brighter the features of financial relations in society appear.
Financial relations- these are monetary relations that arise during the distribution and redistribution of the value of the social product and part of the national wealth in connection with:
- the formation of cash income and savings among economic entities and the state,
- formation and use of funds for special purposes.
Financial relations arise in departments of social production, in all its sectors, at all stages of value distribution. Financial relations are regulated by civil law:
- privatization procedure,
- procedure for debiting funds from a current account,
- accounting policy procedure,
- objects of taxation, etc.
System of financial relations
Financial relations of enterprises, depending on their content, are grouped according to the following areas:
- this is the relationship between the founders at the time of organization of the enterprise regarding the formation of the authorized capital;
- relations between enterprises related to the production and sale of products and the emergence of newly created value;
- these are relationships between suppliers, buyers, contractors and other economic entities;
- these are relationships between departments (between workshops and branches);
- between the enterprise and employees. They arise when distributing income received, when placing securities, when paying dividends, when collecting fines and compensation, and when paying wages;
- between the enterprise and a higher organization (within a holding company, within a financial and industrial group, relations with various associations.). This group of relationships can arise in the formation, distribution and use of resources received to finance targeted programs, for research and for investment projects;
- between enterprise and state. (Payment of taxes, contributions to extra-budgetary funds, penalties, fines. Provision of tax benefits and subventions.);
- relations between the enterprise and the banking system. (purchase and sale of currency, repayment/provision of loans.);
- relations between the enterprise and insurance companies (when concluding an insurance contract);
- relations between an enterprise and investment institutions regarding the placement of investments.
In the process of economic activity of an enterprise, specific types of economic relations may arise that are associated with the insolvency of the organization.
The role of finance of business entities:
- with their help, the circulation of funds is maintained, i.e. change of forms of ownership. (Monetary form => commodity => monetary.);
- there is a distribution of proceeds from the sale of goods after taxes (excise taxes and VAT);
- there is a redistribution of net income for payments to the budget and profit, which remains at the disposal of the enterprise;
- the profit of the lagging enterprise is used to distribute it to consumption funds, accumulation funds, the reserve fund and other purposes that are provided for in the financial plan;
- control over compliance between material and monetary resources in the process of individual financial circulation.
Financial flows have a forward and reverse direction, i.e. are bilateral in nature.
Subjects of financial relations
Financial relations require the presence of groups of interested parties:
1. Creditors. Interested in the stable financial condition of the company, which allows you to repay the loan on time:
- banks,
- company suppliers,
- buyers of products (about, forms, payment terms and various obligations),
- participants in the debt securities market (banks, financial companies, mutual funds, state pension funds, other enterprises and individuals.
2. Business owners- interested in maintaining the deposit and accruing income. Ownership of an enterprise itself can be accomplished through the acquisition of shares or the redemption of shares or interests (if it is not a joint-stock company).
3. Enterprise employees. In some ways, their relationship is of a credit nature, regarding wages worked out but not paid, taxes, contributions to the pension fund, etc. Among the employees, it is necessary to identify managers who are personally interested in the state and position of the company in the market. Managers, as a rule, are also co-owners of the company, giving them the right to receive dividends.
4. State, is interested in receiving taxes, the relationship can be bilateral (for example, in the case of financing from the budget or extra-budgetary funds).
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For the occurrence finance As a sphere of economic relations, it is necessary for the emergence and coincidence in time at a certain historical stage of a whole set of conditions (or prerequisites), such as:
- education and recognition of individuals for goods, services, land, etc.;
- the existing system of legal norms regarding property relations;
- strengthening the state as a spokesman for the interests of the entire society, acquiring the status of owner by the state;
- the emergence of socially diverse population groups.
All these conditions arise under one general prerequisite: a sufficiently high level of production, an increase in its efficiency, growth and exceeding the limits necessary for biological survival.
The formation, distribution and use of monetary income is the main condition for the emergence of finance.
Financial interests are the interests of the owners of monetary income.
For the emergence of finance, a high level of development of the monetary economy, a constant circulation of money in large quantities, and the formation and use of the basic functions of money are also necessary. Finance- is the movement of cash income. Financial relations always affect property relations. These are not only monetary relations, but also property relations. The subject of economic relations must always be the owner. It is by distributing and using cash income, of which he is the owner, that each participant in economic relations can realize his interests.
Financial resources
No economic or political decision of any importance can be implemented without a preliminary assessment of the amount of monetary income required for this. The distribution and accumulation of monetary income acquires a targeted character. The concept of “financial resources” arises. Being monetary income, accumulated and distributed for certain purposes, financial resources are used for various social, economic, scientific, cultural, political and other purposes (Fig. 18).
Financial resources- These are accumulated incomes intended for specific needs.
Financial resources serve all stages of the movement of cash income from their formation to use.
Since finances are determined by the movement of cash income, the patterns of their movement affect finances. Income usually passes through three stages (stages) in its circulation (Fig. 19):
Finance, as we see, relates to all stages of the formation, distribution and use of monetary 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 is, as a rule, continuous, it is necessary to allocate part of the proceeds at the stage of sales of 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 receipts.
Secondary distribution of monetary income (redistribution) can occur in several stages, that is, it is of a multiple nature.
As can be seen from the schematic recording of the abstract production process (Fig. 20), any production ends with the primary distribution of monetary income, without which further economic development is impossible. And the distribution of money income ( D") is served by finance. 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 loans, 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. These are primarily 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 towards accumulations and savings. However, there is the following financial equality, which is not violated under any circumstances:
ΣA = ΣB + ΣС,
- A- primary income;
- IN— final income;
- WITH- savings and savings.
The distribution process is influenced not only by finances, but also by prices.
Since the process of selling any goods (goods, services, etc.) into monetary income is carried out at certain prices, then price dynamics has an independent impact on the distribution process. The more prices change (both up and down), the more money income fluctuates. These shifts occur especially sharply in conditions of inflation.
Financial resources as part of cash income come 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 part, for a family - all the income of its members, etc.
Financial resources- this is that 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 relationships with every business entity, with every citizen. In this regard, the problem arises of combining scattered 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 from the population, and pay interest on these resources. Financial intermediaries provide raised resources as loans or place them in securities. Their income consists of the difference between the interest paid on the resources attracted 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 encounter intermediaries - dealers And brokers, which represent professional participants in financial markets. Dealers carry out transactions independently, on their own behalf; brokers act only on behalf of clients and on their behalf.
Timely financial market offers potential investors wide investment opportunities through the acquisition of monetary obligations of a wide range of business entities. These monetary obligations are called financial instruments. These include: promissory notes, futures contracts, etc. A variety of financial instruments allows money owners to diversify their investment portfolio, that is, invest their savings in the obligations of different companies and banks. These obligations will have different returns, but also different degrees of risk. If a company goes bankrupt, investments in other companies will remain. Diversification of an investment portfolio is carried out according to the principle: “you cannot 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 monetary 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 money and servicing the circulation of money income, concern almost all individuals and legal entities. Main participants in financial relations are producers of any product (real sector of the economy); budgetary and non-profit organizations; population, state, banks and special financial institutions. In the course of their development, financial relations give rise to credit and exist with them in close relationship (Fig. 22).
Credit relations is part of financial relationships. Both are the result of monetary relations.
Credit relations arise in connection with the provision of money by one entity to another (individuals and/or legal entities) on the terms urgency, repayment, 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 flow, reflecting the formation of primary, secondary and final income.
Primary income are formed as a result of distribution (work, services). The amount of revenue is divided into a fund for compensation of material costs incurred in the production process (cost of raw materials, equipment, rent), the employee and the owner of the means of production. Thus, during the primary distribution, the income of the owners is 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, government revenues are partially generated.
At the second stage, from primary income Direct taxes and insurance payments are paid, and assistance is provided to the disabled. From the newly created funds of funds, in particular, from various levels of government, funds are paid representing the expenses of workers in the non-material sphere, doctors, teachers, notaries, office workers, military personnel, etc.
As a result of this process, a new income structure is formed. It consists of secondary incomes formed during the redistribution of primary incomes.
But doctors, teachers, and employees, in turn, pay taxes and make insurance contributions. These taxes and contributions form funds intended for certain payments. As a result of such payments, tertiary income may be generated. The chain of their formation is almost impossible to trace. The movement of these incomes is a very complex process.
The result of this process, its third final stage, is the formation of final income. They are used to purchase goods and services. A certain portion of income is saved.
The amount of primary income for a certain period necessarily equals the amount of final income plus savings. Distribution and redistribution of income means the formation of a new structure. Moreover, this structure reflects the economic relations (connections) between economic structures and the state.
At each stage of income generation, funds of funds are formed, i.e. finance. 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.
Distribution process added(newly created) cost through is shown in Fig. 1. As can be seen from Fig. 1, as a result of the distribution of primary income of owners (entrepreneurs and workers), the income of workers in the non-material sphere is formed. However, it should be taken into account that in reality distribution processes are much more complex than reflected 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 budgets participating in subsequent redistributions of income.
Finance as monetary relations arises at the stage of distribution. But they are the most important link in everything and have the strongest influence on it.
Control function
Control function consists of constant monitoring of the completeness, accuracy and timeliness of receipt of income and implementation of expenses from all levels and. This function manifests itself in any financial transaction. All these operations must not only be economically feasible, but also not contradict current legal norms. The control function of finance is expressed in the formation of funds of funds (budgets and extra-budgetary funds) in accordance with the declared goals and according to the standards established by the legislature. This function involves not only monitoring processes occurring in the financial sector, but their timely adjustment in accordance with the norms of current legislation.
The practical expression of the control function of finance is the system. This control ensures the validity of the formation of budget system revenues and the expenditure of budgetary funds 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 expenses and preparing draft budgets. Its purpose is to ensure the correctness of budgetary indicators. Current control is responsible for the timeliness and completeness of the collection of planned income and the targeted expenditure of funds. Subsequent control is aimed at verifying the reporting data.
Stimulating function
Stimulating function finance is associated with the impact on processes occurring in the real economy. Thus, during the formation of budget revenues, tax benefits may be provided for certain industries. The purpose of these incentives is to accelerate the growth rate of technologically advanced products. In addition, the budgets provide for expenses that can ensure structural restructuring of the economy through financial support for high-tech 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.
One can also define credit as a system of economic relations regarding the transfer from one owner to another for temporary use of values (including money). Credit relations have their own specifics. A loan is associated with the transfer of a fund of funds for temporary use on the terms of repayment, urgency, payment, and security. These conditions distinguish credit relationships from other financial relationships.
See also:Finance is one of the most important economic categories, reflecting economic relations in the process of creating and using funds.
Reducing finance to cash is illegal, because in fact it means certain transactions with money, their movement. Any financial transaction involves the movement of funds between economic entities, users of funds, or the movement of funds into certain funds. In the process of this movement, economic relations arise (for example, when paying pensions, paying taxes). Thus, finance is an economic category; it expresses part of economic relations.
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 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, first of all, the labor costs of associated producers are measured, and finance is an economic instrument for the distribution and redistribution of gross domestic product 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.
The opinion that only the budget and its formation should be classified as finance is erroneous, because in addition to the area of public finance, there are many relations that are not related to the formation of the state budget; there are also relations in the formation of funds at the enterprise.
When participating in economic relations, finance interacts with various economic categories, therefore it is necessary to determine the boundaries of financial relations, i.e., which instrument, which economic operation belongs to the financial sphere. To determine the boundaries of financial relations, you need to find the distinctive features of finance that are inherent only in financial relations and reflect their specificity.
Let's look at them:
Finance is a monetary category (related to funds). Although during the period of war communism there was a surplus appropriation system, taxes were paid in kind. And now at the regional level, payments to the budget come from part of the production of an enterprise that works for “black cash” or through barter. These relationships are not financial.
Finance is not concerned with any form of cash flow. There are two main forms - exchange and distribution.
Exchange is when the monetary form is replaced by a commodity form, or the monetary form moves towards the commodity equivalent. During distribution, only the cash equivalent moves, and only unilaterally, although the return of funds after a certain time is allowed. Finance is concerned only with distribution.
Distribution carried out with the help of finance is associated with the concepts of “financial resources” and “monetary funds”. Distribution occurs through the formation and use of monetary funds, i.e. finance uses the fund method of distribution.
distribution of financial resources through the formation and use of funds on a non-equivalent basis.
Finance expresses the monetary relations that arise between:
· enterprises in the process of acquiring inventory, selling products and services;
· enterprises and higher organizations when creating centralized funds of funds and their distribution;
· the state and enterprises when they pay taxes to the budget system and finance expenses;
· by the state and citizens when they make taxes and voluntary payments;
· enterprises, citizens and extra-budgetary funds when making payments and receiving resources;
· individual parts of the budget system;
· property and personal insurance bodies, enterprises, the population when paying insurance premiums and compensation for damage, upon the occurrence of an insured event;
· monetary relations mediating the circulation of enterprise funds.
A modern economy cannot exist without public finance. At certain stages of historical development, a number of needs of society can only be financed by the state. These are the nuclear industry, space research, a number of new priority sectors of the economy, as well as enterprises that are necessary for everyone (mail, telegraph and some others).
Finance reflects the level of development of productive forces in individual countries and the possibility of their influence on macroeconomic processes in economic life.
Finance is a monetary relationship that arises in the process of distributing the gross social product in connection with the formation of cash income from business entities and the state and its use for expanded reproduction, stimulation of workers, satisfaction of social and other needs of society. Finance differs from wages, other income, and credit in that finance is an unequal relationship; it expresses a one-way movement of value (salary is a two-way movement; credit is a repayable relationship).
Financial resources are provided free of charge and without return. With the help of finance, various state and public needs are satisfied:
· education
military needs
· expenses for social purposes
· improvement of capital reproduction
· environmental protection, etc.
The main material source of monetary funds is the country's national income - newly created value or the value of the gross domestic product minus the tools and means of production consumed in the production process. Without the participation of finance, national income cannot be distributed. Finance is an integral link between the creation and use of national income. Finance affects production, distribution and consumption and is objective in nature. They express a certain sphere of production relations and belong to the basic category.
In terms of its material content, finance is a trust fund of funds, which together represent the financial resources of the country. The main condition for the growth of financial resources is an increase in national income. Finance and financial resources are not identical concepts. Financial resources in themselves do not determine the essence of finance. Their internal contents and public purpose are not disclosed. Financial science studies resources as such, and social relations arising on the basis of the formation, distribution and use of resources; it explores the patterns of development of financial relations.
Although finance belongs to the basic category, it largely depends on the financial policies pursued by governments.
2. Types and types of financial relations of organizations
Finance is not the money itself, but the relationship between business entities, the state, and individuals regarding the formation, distribution and use of funds of money.
The set of monetary relations arising in connection with the movement of funds of monetary funds forms financial relations.
Financial relations that determine the content of finance as an economic category usually include monetary relations that arise in the process of expanded production between:
the state and organizations for the payment of taxes and other payments to the budget, as well as for financing from the budget a number of costs of business entities (loans, subsidies);
organizations and higher structures when creating funds of cash and reserves, financing sectoral target programs;
organizations and banks when receiving loans, paying interest on loans, storing funds in bank accounts;
organizations and insurance bodies when paying insurance premiums and compensation from the insurance fund for damage upon the occurrence of an insured event;
organizations and employees when paying wages and other incentive payments, applying economic sanctions against employees, selling them securities;
business entities in the process of their production and commercial activities when paying for purchased inventory assets (raw materials, materials, fuel, electricity), when selling finished products and providing services, as well as in the process of formation, distribution and use of financial resources (including during mergers and divisions, regarding financial insolvency and bankruptcy of the organization);
organizations and founders at the time of creation of a business entity on issues of formation of the authorized capital, subsequently - on the distribution of profits, etc.
However, not all monetary relations are financial. Financial relations cover only that part of the relationship that is associated with the formation and use of funds of funds.
Thus, in the process of economic activity at enterprises, there is a movement of materials from one division to another without payment in cash. The monetary expression of the value of material assets in such operations is used only for accounting and monitoring the progress of economic processes and does not apply to finance.
The system of financial relations does not include commodity exchange transactions, which still occupy a prominent place in the relationships between economic entities.
Thus, we can distinguish the following main features of finance:
Economic relations using money;
In the process of economic relations, monetary funds are formed and used.
3. Principles and functions of organizational finance
The basic principles of an organization’s finances include:
the principle of economic independence, the financial aspect of which consists in independently determining expenses, sources of financing, directions for investing funds and disposing of profit after taxes, etc.;
the principle of self-financing, which means full recoupment of the costs of production and sales of products, investing in the development of activities at the expense of one’s own funds and, if necessary, bank and commercial loans, and other forms of external financing on a repayable basis;
the principle of creating financial reserves, due to the need to generate financial resources that support entrepreneurial activity in the face of risks associated with fluctuations in market conditions;
the principle of diversification, which provides for the availability of multiple sources of financing and areas of capital investment;
the principle of planning, which presupposes the need to plan the movement of financial resources and the efficiency of their use;
the principle of flexibility and agility, which means the need for a quick response, making alternative decisions and maneuvering in the event of failure to achieve forecast production and sales volumes, or exceeding planned costs;
the principle of material interest in the results of activities, which is implemented through sufficient remuneration, optimal tax policy of the state, compliance with economically justified proportions in the distribution of net profit;
the principle of material responsibility, which presupposes the existence of a certain system of responsibility for the results of responsibility for the results of financial and economic activities.
The implementation of these principles allows you to create an effective financial management system.
The essence of finance, its specific content is revealed in its functions, which include distribution and control.
The first function of finance is the distribution and redistribution of national income in the state. The material basis for creating a state’s national income is the reproduction of the social product (gross domestic product). At all stages of reproduction of the gross domestic product and its distribution (actual production, distribution, exchange and final consumption), finance is directly used.
National income is divided into two parts - the accumulation fund and the consumption fund. The relationship between these parts determines the proportions of economic development and its structure.
The need for redistribution of national income is caused by:
the presence of a non-productive sphere in which national income is not created (government administration, education, health care, social security), but without which production cannot be effective;
the need to ensure social development;
the importance of creating favorable conditions for entrepreneurship, which requires the provision of grants and subsidies.
Finance also performs its distribution function in the process of generating and distributing income of organizations.
When selling products, enterprises generate revenue and, accordingly, income. One part of this income goes to the state budget: state target budget and extra-budgetary funds, and the other remains at the disposal of the organization for the formation of wage funds, economic stimulation and financing of costs for the expansion and development of production.
The second important function of finance is control. It is generated by the distribution function and is manifested, first of all, in control over the distribution of the total social product and national income among monetary funds and their intended expenditure.
The control function of finance is carried out in two ways: firstly, through control by the ruble, and secondly, through control exercised by financial authorities. Through finance, enterprises exercise ruble control over the formation of cash income, compliance with the economy regime and the use of material and labor resources, the quantity and quality of labor, the use of fixed and working capital, the formation and use of incentive funds, etc.
Control over the ruble is carried out not only within the organization, but also in relationships with higher structures, with financial and credit institutions, and counterparties.
The economic activities of enterprises are controlled by the ruble in the process of fulfilling obligations to the budget for payments to the budget and financing from the budget. Control by financial authorities and departmental services is carried out by checking the legality of spending funds and the completeness of payment of taxes.