Professional Documents
Culture Documents
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.
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.
The United Kingdom budget is prepared by the Chancellor of the Exchequer, the second most important member of
the government, and must be passed by Parliament. Parliament seldom makes changes to the budget.
A government budget is a legal document that is often passed by the legislature, and approved by the chief
executive-or president. For example, only certain types of revenue may be imposed and collected. Property tax is
frequently the basis for municipal and county revenues, while sales tax and/or income tax are the basis for state
revenues, and income tax and corporate tax are the basis for national revenues.
The two basic elements of any budget are the revenues and expenses. In the case of the government, revenues are
derived primarily from taxes. Government expenses include spending on current goods and services, which
economists call government consumption; government investment expenditures such as infrastructure investment or
research expenditure; and transfer payments like unemployment or retirement benefits.
Budgets have an economic, political and technical basis. Unlike a pure economic budget, they are not entirely
designed to allocate scarce resources for the best economic use. They also have a political basis wherein different
interests push and pull in an attempt to obtain benefits and avoid burdens. The technical element is the forecast of the
likely levels of revenues and expenses.
A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt
repayment. Past spending and personal debt are considered when creating a personal budget. There are several
methods and tools available for creating, using and adjusting a personal budget.
Budget types
Sales budget: The sales budget is an estimate of future sales, often broken down into both units and dollars. It is used
to create company sales goals.
Production budget: Product oriented companies create a production budget which estimates the number of units that
must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with
manufacturing those units, including labor and material.
Cash Flow/Cash budget: The cash flow budget is a prediction of future cash receipts and expenditures for a
particular time period. It usually covers a period in the short term future. The cash flow budget helps the business
determine when income will be sufficient to cover expenses and when the company will need to seek outside
financing.
Marketing budget: The marketing budget is an estimate of the funds needed for promotion, advertising, and public
relations in order to market the product or service.
Project budget: The project budget is a prediction of the costs associated with a particular company project. These
costs include labor, materials, and other related expenses. The project budget is often broken down into specific tasks,
with task budgets assigned to each.
Revenue budget: The Revenue Budget consists of revenue receipts of government and the expenditure met from
these revenues. Tax revenues are made up of taxes and other duties that the government levies.