Public Finance:

Definition and Explanation:

Public finance, according to the traditional definition of the subject, is that branch of Economics which deals with, the income and expenditure of a government. In the words of Adam Smith: "The investment into the nature and principles of state expenditure and state revenue is called public finance". The earlier economists were perfectly justified in giving this definition of the science of public finance because the functions of the public authorities in those days were simply to raise revenue by imposing taxes for covering the cost of administration and defense. The scope of the science of public finance now-a-days has widened too much. It is due to the fact that modern states have to perform multifarious functions to promote the welfare of its citizens. In addition to maintaining law and order within the country and provision of security from external aggression, it has to perform many economic and commercial functions. Due to the increased activities of the state, there has taken place a vast increase in the expenditure of the public authorities. The sources of revenue have also increased. Taxes are levied not for raising the revenue alone but are used as an important instrument of economic policy. Public finance now includes the study of financial administration and control as well. We, therefore, agree with Professor Bastable when he defines public finance as that: "Branch of economics which deals with income and expenditure of public authorities or the state and their mutual relation as also with the financial administration and control the term public authorities includes ail bodies which help in carrying on the administration of the state)". The study of public finance is split up into four parts; (1) Public Expenditure (2) Public Revenue, (3) Public Debt and (4) Budgeting etc.

Relevant Articles:
Public Finance Public Finance Versus Private Finance Public Expenditure

Public Finance Versus Private Finance:

Difference Between Public Finance and Private Finance:
Public finance is different from private finance. Findlay Shiraz in his famous book 'Principles of Public Finance' has listed the following points of difference between government finance and private finance. (i) Adjustment of Income and expenditure. An individual usually adjusts his expenditure to his income. But the public authority generally adjusts its income to its expenditure. In other words, we can say that an individual cuts his coat according to his cloth. While the public authority first decides the size of the coat and then tries to procure cloth according to the size of its coat. The public authority prepares an estimate of the total expenditure to be incurred

during a fiscal year and then devises ways and means to raise the required amount. The individual, on the other hand, tries to live within his own means. His expenditure is generally determined by his income. (ii) Unit of time. The public authority balances its budget during a given period which is generally a year. For an individual, there is no period of time in the course of which the budget must be balanced. The individual generally continues earning and spending without keeping any record-of his budget by a particular date. The public authority, however, has to keep full records of its income and expenditure and the accounts are to be in balance during the financial year. (iii) An Individual cannot borrow from himself. If at any time an individual is in need of money, he cannot borrow from himself. He can raise me loan from other individuals or can utilize his past savings, but he cannot borrow internally. The public authority, on the other hand, can borrow internally from its own people and externally from other nations. (iv) Issue of currency? Government has full control over the issue of currency in the country. No other person except the stale can print notes. If an individual floes so, be will be put behind the bars. (v) Provision for the future. The government has to make a solid provision for the future. It spends large amounts of money on those projects which the future generation is only to benefit. The individuals, on the other hand, are not generally liberal and far sighted. They discount the future at a higher rate and so usually make inadequate provision for the future. (vi) Big and deliberate changes in public finance. It, is easier for the government to make big and deliberate changes in its income, and expenditure but for an individual it is a very difficult affair. A few individuals may succeed in increasing their incomes but all the persons cannot do so. The public authority can also make deliberate decrease in its income without feeling any difficulty. But for individuals, reduction in income is very painful as they are used to certain standard of living. (vii) Surplus budgeting. For an individual, excess of income over expenditure or surplus budgeting is considered to be a virtue but for the public authority it is not as such, it is expected from the government that it should raise only as much revenue as it needs during a calendar year. After all what is the fun of showing persistently surplus budgets. It is not better to give relief to the tax-payer; than to show surplus budgets? (viii) Mystery shrouds Individual Finance. Individual's finance is usually shrouded in mystery. Everybody likes that his financial position should 1 remain a closely guarded secret but this is not the case with public authorities. The government publishes its budget and gives due publicity to it.

Economic Definition of public finance. Defined.

Offline Version: PDF Term public finance Definition: The study of how the government (or public) sector pays for (or finances) expenditures through taxes and borrowing. Governments produce or provide valuable goods and services, such as education, security, and transportation. They pay for these goods by collecting taxes or, if taxes fall short, by borrowing through the financial markets. Public finance adapts and applies the fundamental microeconomic theory of markets to the public sector and government

activity. In particular, this area of study analyzes the efficiency of taxes and the market failure of public goods. Public finance is also key to the study of government stabilization policies that address the inflation and unemployment problems of business cycles. In particular, fiscal policy is the manipulation of government expenditures and taxes to stabilize the business cycle.

Public finance
Definition
Collection of taxes from those who benefit from the provision of public goods by the government, and the use of those tax funds toward production and distribution of the public goods. Ads by Google Read more: http://www.businessdictionary.com/definition/publicfinance.html#ixzz1uSYE9M6T

Public finance management

Collection of sufficient resources from the economy in an appropriate manner along with allocating and use of these resources efficiently and effectively constitute good financial management. Resource generation, resource allocation and expenditure management (resource utilization) are the essential components of a public financial management system. Public Finance Management (PFM) basically deals with all aspects of resource mobilization and expenditure management in government. Just as managing finances is a critical function of management in any organization, similarly public finance management is an essential part of the governance process. Public finance management includes resource mobilization, prioritization of programmes, the budgetary process, efficient management of resources and exercising controls. Rising aspirations of people are placing more demands on financial resources. At the same time, the emphasis of the citizenry is on value for money, thus making public finance management increasingly vital. Banking Institutions - corporations, companies or associations which are engaged in the lending of funds obtained from the public through the receipt of deposits and the sale of bonds, securities or obligations of any kind. Banks, Commercial - corporations engaged regularly in the lending of funds obtained from the public through the receipt of deposits and which accept or create demand deposits subject to withdrawal by checks. Banks, Private Development - a group of quasi-private development banks promoted by the Development Bank of the Philippines to provide medium and long term credits to both the agricultural and industrial sectors. Designed to supplement

the short-term credits of the rural banks, they are classified as mortgage banks and are able to accept only savings and time deposits. Banks, Rural - government-sponsored/assisted banks which are privately managed and largely privately owned that provide credit facilities to farmers and merchants, or to cooperatives of such farmers or merchants at reasonable terms and in general, to the people of the rural community. Banks, Savings and Mortgage - any corporation organized for the purpose of accumulating the small savings of depositors and investing them, together with its capital, in bonds or in loans secured by bonds, real estate mortgage, and other forms of security, as hereinafter provided, or in loans for personal finance and long-term financing for home building and home development. Banks, Specialized Government - these are completely government-owned institutions established mainly to provide medium and long-term credits to the industrial, agricultural and real estate sectors of the economy. Financing Company - a corporation or partnership which is primarily organized for the purpose of extending credit facilities to consumers and to industrial or agricultural enterprises by discounting or factoring commercial papers or accounts receivables or buying and selling contracts, leases, chattel mortgages and other evidences of indebtedness or by leasing motor vehicles, heavy equipment and industrial machineries and equipment, appliances, etc. Financial Institutions, Non-Bank - persons or entities whose principal functions include the lending, investing, or placement of funds or evidences of equity deposited with them, or otherwise coursed through them, either for their own account or for the account of others. Investment Company - an entity primarily engaged in investing, reinventing or trading in securities. Investment House - an enterprise engaged in guaranteed underwriting of securities of another person or enterprise, including securities of government and its instrumentalities. Lending Investor - a person who make a practice of lending money for themselves or others at interest and who are not organized under any specialized chartered law. Pawnshop - a business establishment engaged in lending money on personal property delivered as security or pledge. Single Proprietorship - a business establishment whose ownership is vested in the person who assumes all risks of loss or benefits of the enterprise. Tax, Estate - a tax on the net estate transferred by a decedent. Tax, Income - a generally progressive tax on income of whether kind or nature received during one taxable year.