A budget is a financial plan for a defined period of time, usually a
year. It may also include planned sales volumes and revenues, resource
quantities, costs and expenses, assets, liabilities and cash flows.
Companies, governments, families and other organizations use it to
express strategic plans of activities or events in measurable
A budget is the sum of money allocated for a particular purpose and
the summary of intended expenditures along with proposals for how to
meet them. It may include a budget surplus, providing money for use at
a future time, or a deficit in which expenses exceed income.
Comme Sisyphe - Honoré Daumier (Brooklyn Museum)
4 Event management
5.1 United Kingdom
5.2 United States
6 Personal or family
9 External links
A budget (derived from old French word bougette, purse) is a
quantified financial plan for a forthcoming accounting period.
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
A budget helps in planning actual operations by forcing managers to
consider how the conditions might change and what steps should be
taken now, and by encouraging managers to consider problems before
they arise. It also helps to co-ordinate the activities of the
organization by compelling managers to examine relationships between
their own operation and those of other departments. Other essentials
of budget include:
To control resources
To communicate plans to various responsibility center managers
To motivate managers to strive to achieve budget goals
To evaluate the performance of managers
To provide visibility into the company's performance
In summary, the purpose of budgeting tools:
Tools provide a forecast of revenues and expenditures, that is,
construct a model of how a business might perform financially if
certain strategies, events and plans are carried out.
Tools enable the actual financial operation of the business to be
measured against the forecast.
Lastly, tools establish the cost constraint for a project, program, or
The budget of a company is often compiled annually, but may not be a
finished budget, usually requiring considerable effort, is a plan for
the short-term future, typically allows hundreds or even thousands of
people in various departments (operations, human resources, IT, etc.)
to list their expected revenues and expenses in the final budget.
If the actual figures delivered through the budget period come close
to the budget, this suggests that the managers understand their
business and have been successfully driving it in the intended
direction. On the other hand, if the figures diverge wildly from the
budget, this sends an 'out of control' signal, and the share price
could suffer. Campaign planners incur two types of cost in any
campaign: the first is the cost of human resource necessary to plan
and execute the campaign. The second type of expense that campaign
planners incur is the hard cost of the campaign itself.
A budget is a fundamental tool for an event director to predict with a
reasonable accuracy whether the event will result in a profit, a loss
or will break-even. A budget can also be used as a pricing tool.
There are two basic approaches or philosophies, when it comes to
budgeting. One approach is telling you on mathematical models, and the
other on people.
The first school of thought believes that financial models, if
properly constructed, can be used to predict the future. The focus is
on variables, inputs and outputs, drivers and the like. Investments of
time and money are devoted to perfecting these models, which are
typically held in some type of financial spreadsheet application.
The other school of thought holds that it’s not about models, it’s
about people. No matter how sophisticated models can get, the best
information comes from the people in the business. The focus is
therefore in engaging the managers in the business more fully in the
budget process, and building accountability for the results. The
companies that adhere to this approach have their managers develop
their own budgets. While many companies would say that they do both,
in reality the investment of time and money falls squarely in one
approach or the other.
The budget of a government is a summary or plan of the intended
revenues and expenditures of that government. There are three types of
government budget : the operating or current budget, the capital
or investment budget, and the cash or cash flow budget.
The budget is prepared by the Treasury team led by the Chancellor of
the Exchequer and is presented to Parliament by the Chancellor of the
Budget Day. It is customary for the Chancellor to stand
on the steps of Number 11 Downing Street with his or her team for the
media to get photographic shots of the Despatch Box, immediately prior
to them going to the House of Commons. Once presented in the House of
Commons it is debated and then voted on. Minor changes may be made
however with the budget being written and presented by the party with
the majority in the
House of Commons
House of Commons (the Government), the Whips will
ensure that it is passed as written by the Chancellor.
Main article: United States federal budget
The federal budget is prepared by the Office of Management and Budget,
and submitted to Congress for consideration. Invariably, Congress
makes many and substantial changes. Nearly all American states are
required to have balanced budgets, but the federal government is
allowed to run deficits.
Main article: Union budget of India
The first budget of India was submitted on 18 February 1869 by James
Wilson. James Wilson is known as the father of Indian budget. Finance
Minister is the head of the budget making committee. The budget is
prepared by the
Budget Division Department of Economic Affairs of the
Ministry of Finance annually. This includes supplementary excess
grants and when a proclamation by the President as to failure of
Constitutional machinery is in operation in relation to a State or a
Union Territory, preparation of the
Budget of such State.The present
Indian Finance minister is Arun Jaitley.
The Philippine budget is considered the most complicated in the world,
incorporating multiple approaches in one single budget system:
line-item (budget execution), performance (budget accountability), and
zero-based budgeting. The
Department of Budget and Management
Department of Budget and Management (DBM)
prepares the National Expenditure Program and forwards it to the
Committee on Appropriations of the House of Representatives to come up
with a General Appropriations Bill (GAB). The GAB will go through
budget deliberations and voting; the same process occurs when the GAB
is transmitted to the Philippine Senate.
After both houses of Congress approves the GAB, the President signs
the bill into a General Appropriations Act (GAA); also, the President
may opt to veto the GAB and have it returned to the legislative branch
or leave the bill unsigned for 30 days and lapse into law. There are
two types of budget bill veto: the line-item veto and the veto of the
Personal or family
Further information: Personal budget
A personal budget or home 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. For example, jobs are
an income source, while bills and rent payments are expenses.
There are many informational sites and software available for use in
personal and family budgeting.
Sales budget – an estimate of future sales, often broken down into
both units. It is used to create company and sales goals.
Production budget - an estimate of 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. Created by product oriented companies.
Capital budget - used to determine whether an organization's long-term
investments such as new machinery, replacement machinery, new plants,
new products, and research development projects are worth pursuing.
Cash flow/cash budget – 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 to
determine when income will be sufficient to cover expenses and when
the company will need to seek outside financing.
Marketing budget – an estimate of the funds needed for promotion,
advertising, and public relations in order to market the product or
Project budget – a prediction of the costs associated with a
particular company project. These costs include labour, materials, and
other related expenses. The project budget is often broken down into
specific tasks, with task budgets assigned to each. A cost estimate is
used to establish a project budget.
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.
Expenditure budget – includes spending data items..
"Flexibility budget - it is established for fixed cost and variable
rate is determined per activity measure for variable cost.
' Appropriation budget - a maximum amount is established for certain
expenditure based on management judgment.
Performance budget - it is mostly used by organization and ministries
involved in the development activities .This process of budget takes
into account the end results.
Zero based budget - It has clear advantage when the limited resources
are to be allocated carefully and objectively.
^ "CIMA Official Terminology" (PDF). Archived from the original (PDF)
^ O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics:
Principles in Action. Upper Saddle River, New Jersey 07458: Pearson
Prentice Hall. p. 502. ISBN 0-13-063085-3.
^ Cliche, P. (2012). “Budget,” in L. Côté and J.-F. Savard
(eds.), Encyclopedic Dictionary of Public Administration, [online],
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