A 

budget (from old French bougette, purse) is generally a list of all planned expenses and

revenues. It is a plan for saving and spending.[1] A budget is an important concept
in microeconomics, which uses a budget line to illustrate the trade-offs between two or
more goods. In other terms, a budget is an organizational plan stated in monetary terms.

In summary, the purpose of budgeting is to:

1. Provide a forecast of revenues and expenditures i.e. construct a model of how our
business might perform financially speaking if certain strategies, events and plans
are carried out.
2. Enable the actual financial operation of the business to be measured against the
forecast.

Cash flow budget is alternative terms for cash flow forecast

Cash flow budget

For example, we can differentiate between a cash flow forecast and a cash flow budget. The cash flow
forecast - is a forecast of cash coming into and going out of a business based on previous experience
e.g. last month, or last year. A cash flow budget, is a plan usually to generate more cash coming into
a business than going out.

In order to prepare a cash budget the accountant needs to know what receipts and payments are likely
to take place in the future and the dates when they will happen. It is important find the length of lead
time between incurring an expense and paying for it as well as the time lag between making a sale
and collecting from debtors. The art of successful cash budgeting is to be able to plan and calculate
accurately receipts and expenditures.

A cash-flow forecast is a table estimating (on the basis of previous experience) the amounts of money
coming into and going out of a bank account each month.

Usually the cash flow forecast sets out in rows and columns:
1. A totaled up summary of money expected to come into a bank account

2. A totaled up summary of money expected to be paid out of the account

3. The expected bank balance at the end of a period e.g. week, month.

Cash flow forecast for High Street Retailer Ltd For January 2004:
_______________________________________
Opening Balance at 1st January £50,000
Total reciepts for January £6,000
Total payments for January £8,000
Closing balance at end of January £48,000
________________________________________

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 A forecast is different to a budget in that :

 a forecast is an estimate based on past experience

 a budget is a plan for the future.

Therefore whereas a forecast is passive, a budget is active in that it will probably seek to make
changes to what has happened in the past.

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