Money and its functions
Money is anything used by a society to purchase goods, services or resources. Different groups of people have used all sorts of objects as money – whale’s teeth, beads, gold and silver, for example. Today, the most commonly used objects are metal coins and paper bills.
For money to have value, it must perform certain functions, it must be easy to use, and it must be trusted.
Money has three functions in any society:
A Medium of exchange. Money, the medium of exchange, is used in one half of almost all exchange. People buy and sell goods in exchange for money.
A Measure of value. Money serves as a measure of value because the prices of all products and resources are stated in terms of money. Money is used as a yardstick for all bookkeeping, budgeting and management.
A Store of value. Money is a store of value because it may be held and spend later. It is a means for retaining and accumulating wealth.
Types of banks
A bank is an institution that deals in money and provides with financial services. Banks are at the heart of any financial system.
Banking is the business a bank is engaged in.
There exist different types of banks but their names may vary from one country to another.
Central banks such as the National Bank (Ukraine) , the Bank of England or the Federal Reserve System (US) look after the government's finance and monetary policy, act as bankers for the state and for commercial banks and are responsible for issuing banknotes.
Commercial banks deal directly with the public. They offer a wide range of services such as accepting deposits, making loans and managing customers' accounts. The aim of commercial banks is to earn profit.
Finance
Finance is the function in a business that is responsible for obtaining funds, managing funds within it and controlling them. Most organizations have finance managers or financial departments in charge of financial operations. Financial management performs the following finance functions: planning, budgeting, obtaining funds, controlling funds(credit management), collecting funds, auditing, managing taxes and advising on financial matters.
The main task of finance manager is to obtain money, then plan it, use and control money effectively.
Obtaining funds – is a very important finance function, because the amount of money needed for various time periods and its sources are fundamental questions in sound financial management.
Financial control means that the revenues, costs and expenses are periodically reviewed and compared with projection.
Credit management gives a firm chance to earn money having an interest on credits and loans given.
Managing taxes means tax implications of various financial transactions.
Then comes auditing, that is reviewing and checking on the journals, ledgers and financial statements to be sure that everything was done according to accounting rules and procedures.
Finally, financial people help management in decision making. All these functions depend greatly on the information provided by the accounting statements.