Finance, Fundamentals of financial relations, The origin of...


As a result of studying the chapter, the student must:

• Know the basics of monetary relations and financial policy;

• Know the structure of the financial system of the United States;

• have an understanding of extrabudgetary funds and the need for their formation;

• Understand the essence of state and municipal finance;

• Know the features of the formation of finance in the system of international cooperation.

Fundamentals of Financial Relations

The origin of the financial system

The appearance of finance is due to the emergence of the state. The slave state has already performed a number of public functions, such as protecting public order, preserving the existing system, building public buildings, buildings, roads. For the functioning of the state, certain resources were required in cash and in kind, which were withdrawn in the form of taxes. As a result, centralized funds of funds were formed, which led to the emergence of public finances.

The term finance comes from the Latin finis - End, finish, finish. In the Ancient World and the Middle Ages, in the monetary relations arising between the state (king, judges, etc.) and the population, the term "finis" meant the final settlement, the completion of the monetary payment. Those who paid contributions in favor of a judge, a king, or various state bodies were given citizens the "fine" document. From the title of this document, and there was a Latin term "financia", which meant a cash payment.

In the Middle Ages, all these words were used to designate the payment terms and documents proving the repayment of the debt before the end of the transaction. First in France, and then from the end of the XVII century. and in other European countries, the word "finance" they began to understand the whole aggregate of the state's money economy, its incomes and expenditures. As the role of the state increased, its functions expanded, the amount of centralized state money increased. However, as a result of the redistribution, not only centralized, but also decentralized funds of funds were formed. A variety of financial institutions have started to form, acting as intermediaries in the distribution and redistribution of the aggregate social product.

The term finance began to be used in a broader sense, including the finances of economic entities, i.e. finances of enterprises, as well as household finances or personal finances. In other words, finance is a system of monetary relations associated with the formation and use of funds of funds in the process of distribution and redistribution of gross domestic product.

The role of finance in the economy

Finances are a tool for mobilizing funds by economic entities of all sectors of the economy to carry out economic activities and state and municipal authorities to realize their functions. This is a complex of financial transactions through which economic entities and authorities accumulate funds and make money.

Funds accumulated funds in the process of their formation and movement act as carriers of financial relations. The subjects of this relationship are legal entities and individuals, state and municipal government bodies. Economic operations are carried out using money.

Money turnover - the basis of finance, in this connection they reflect the monetary relations that are formed in the process of distributive and redistribution processes carried out by participants in economic activity.

In most countries, the disabled population (individuals under the age of 16-18, as well as those who are in specialized institutions, persons who left the labor force) are 40-60%, unemployed - 2-5%, employed in public institutions - 10-15%. Therefore, in order for any state, in particular Russia, to exist normally, the value created by workers must be rationally divided among all people. The redistribution of living resources between able-bodied and disabled members of society is an obligatory procedure in conditions of their limited number.

Each cycle of reproduction begins with financial resources and has a repetition in the future only after the value created in production and realized in the process of exchange will be distributed and redistributed, resulting in the formation of new financial resources and funds.

The sources of financial resources are:

- at the level of economic entities: profit; depreciation; sale of securities; Bank loan; interest; dividends on securities issued by other issuers;

- at the level of the population: wages; premium; surcharges to wages; payments of a social nature; carried out by the employer; travel expenses; income from business activities, participation in profits, transactions with personal property, monetary operations; social transfers, including pensions, allowances, scholarships;

- at the level of state bodies and local self-government: revenues from state and municipal enterprises, privatization of state and municipal property, foreign economic activity; tax revenues, state and municipal credit, money issue and income from securities issue.

The level and state of finances in the state are largely determined by the state of affairs in the real sector of the economy. This is due to the fact that finance is only part of the money relations that arise at the stage of distribution, or redistribution, of the aggregate social product. Therefore, what is the volume of the created aggregate social product, such is the amount of financial resources that the state, business entities, and households can actually have.

Thus, finance is an economic relationship associated with the formation, distribution and use of centralized and decentralized funds of funds in order to fulfill their functions.

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)