I have category that looks like this:
category 1
What I'm trying to achieve is list of posts and subcategories from category 1:
i.e. in alphabetical order and without posts from subcategories.
I can get list of subcategories (using get_categories), I can get list of posts (using get_posts) but I'm not able to get both (subcategory and post) in one list that can be in A-Z order.
Combine the arrays with array_merge, then use usort to alphabetize. You won't find a standard function that does this for you.