{"id":11965,"date":"2023-01-04T02:01:00","date_gmt":"2023-01-04T02:01:00","guid":{"rendered":"https:\/\/businessyield.com\/?p=11965"},"modified":"2023-02-05T01:04:46","modified_gmt":"2023-02-05T01:04:46","slug":"public-finance","status":"publish","type":"post","link":"https:\/\/businessyield.com\/finance-accounting\/public-finance\/","title":{"rendered":"Public finance: Definition, Scope, Importance, Types and Examples (+ free pdfs)","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"
Public finance is the management of a country\u2019s revenue. The importance of public finance cannot be overemphasized.<\/p>\n
Majorly, it analyses the impact of financial activities taken by the government on individuals and corporate bodies.<\/p>\n
According to Wikipedia<\/a> it is \u201cthe branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones\u201d<\/p>\n This blog post provides an overview of how government finances are handled, the importance, scope of public finance, objectives and types of public finance.<\/p>\n Prof. Dalton in his book Principles of Public Finance states that \u2018Public finance is concerned with income and expenditure of government authorities and with the adjustment of one to the other.\u2019<\/p>\n We can deduce from the above definition that government finance has to do with income and the way the government spends such income at any level \u2013 could be state, local or central.<\/p>\n However, public finance of recent vintage has a wider scope, it studies the impact policies set up by the government has on the economy.<\/p>\n Why is public finance important?<\/p>\n Majorly, the goal of public finance is to monitor and recognize when, how and why the government officials should intervene in the current economy.<\/p>\n Understanding certain roles played by the government and how changes may affect the economy are a few important aspects of public finance professionals.<\/p>\n We can\u2019t ignore the fact that public finance is a very important aspect of the growth and development of a country.<\/p>\n It is very important tool to aid in achieving sustainable high economic growth rate.<\/p>\n The government makes use of of fiscal tools in order to increase aggregate demand and aggregate supply.<\/p>\n Fiscal policy tools can be defined as the tools used by the government in taxing and spending to expand or contract economic growth.<\/p>\n These tools include: public debt, public expenditure, taxes, etc.<\/p>\n Government officials use public finance to overcome inflation and deflation.<\/p>\n How does this work?<\/p>\n During inflation they reduce the indirect taxes and genera expenditures but increases direct taxes and capital expenditure.<\/p>\n The government makes use of fiscal policy to stabilize the economy.<\/p>\n However, during a prosperous overflow of resources, the government increases tax and raises internal public debt.<\/p>\n The amount gotten is used to repay foreign debt and invention.<\/p>\n The internal expenditures are reduced and during a recession, reverse is the case.<\/p>\n Government finance can be gotten from the sources listed below:<\/p>\n They are paid to the government usually by households and companies to the government and other public agencies.<\/p>\n Examples include: income tax, payroll tax, corporate or public tax<\/p>\n They are paid to the government by public agencies via a third party (a retailer or supplier).<\/p>\n This tax is mostly based on what households or a company spends and it includes value-added tax, sales tax, and excise tax on alcohol and import duties.<\/p>\n They are paid to the government by state-owned companies, including natural resource revenues such as oil and gas.<\/p>\n The government also gets financing from charges, fees, and earnings.<\/p>\n Charges and fees are levied for publicly provided commodities (that is \u2013 goods and services), which are not public goods.<\/p>\n See also: FINANCIAL ACCOUNTING: Best practices and Detailed Guide (+free courses)<\/a><\/p>\n The scope of public finance refers to the operation of public finance. The scope of public finance refers to the methods government finances are gotten or used.<\/p>\n This refers to the income of the government. The government usually earns its income in two ways \u2013 tax and non tax income.<\/p>\n Tax income is gotten from the people of the country and it is paid in form of duties, sales tax, etc.<\/p>\n Non income tax includes interest income gotten from lending money to other countries, rent and income from government properties, donations gotten from world organizations, etc.<\/p>\n It is the money government officials spends every year. The government uses its money on infrastructure, defense, education, healthcare, etc.<\/p>\n Public debt occurs when public expenditure exceeds public income, and the government fills the gap by borrowing money from the public or from organizations like the World Bank.<\/p>\n What are the main objectives of government finance? Lets take a look at some of them below:<\/p>\n Government finance helps in distributing a country\u2019s wealth among the individuals and various sections of the country.<\/p>\n Government finance aids the allocation of resources among the government and private entities in a country.<\/p>\n Government finance aims to provide an environment that provides employment opportunities for its citizenry.<\/p>\n Above are the top 3 objectives of public finance.<\/p>\n Let\u2019s move on to the types of public finance:<\/em><\/p>\n Read More: FINANCIAL INCLUSION: Overview, Importance, Objectives, Examples (+ Free PDFs)<\/a><\/p>\n The major types of government finance include:<\/p>\n This is the money the government from tax and non tax sources, to enable the government undertake expenditures.<\/p>\n This is the money the government of a country spends on the needs and wants of the citizens in a country such as pension, provisions, security, infrastructure, etc.<\/p>\n This is the difference between governments revenue and government expenditure in a country.<\/p>\n Financial administration deals with the task of handling financial taxes in a country, company or organization.<\/p>\n It includes: controlling the budget, writing financial reports, providing money for projects, etc.<\/p>\n This is a field of public administration that involves monitoring how much is spent by the government each year, preparation of budgets, etc.<\/p>\n The examples of government finance are: public revenue (gotten from tax and non tax sources), public expenditure, public budgeting, public debt and financial administration.<\/p>\n Below is a list of PDFs that will explain the concept of government finance in clearer terms.<\/p>\n Click on the links to download immediately.<\/p>\n 1.Public finance: Concept, Definition, and Importance for Country\u2019s Development by Research Gate.<\/a><\/p>\n 2. Public Finance \u2013 Basic concepts, Ties and Aspects.<\/p>\nWhat is public finance?<\/h2>\n
Importance of public finance<\/h2>\n
\nLet\u2019s take a deeper look into some of the importance of public finance:<\/strong><\/p>\n1.It leads to economic growth:<\/h3>\n
2. Price stability<\/h3>\n
3. Economic stability<\/h3>\n
Main sources of government finance<\/h2>\n
1.Direct taxes<\/h3>\n
2. Indirect taxes<\/h3>\n
3. Non-tax revenues<\/h3>\n
4. Charges and fees<\/h3>\n
Scope of government finance<\/h2>\n
1.Public income<\/h3>\n
2. Public expenditure<\/h3>\n
3. Public debt<\/h3>\n
Objectives of government finance<\/h2>\n
1.Equitable distribution of wealth<\/h3>\n
2. Allocation of resources<\/h3>\n
3. It aids in the provision of employment opportunities.<\/h3>\n
Types of government finance<\/h2>\n
1.Public revenue<\/h3>\n
2. Public expenditure<\/h3>\n
3. Public debt<\/h3>\n
4. Financial administration<\/h3>\n
4. Public budgeting<\/h3>\n
Public finance examples<\/h2>\n
Public finance pdfs<\/h2>\n