Budget

For other uses, seeBudget (disambiguation).

Abudgetis acalculationplan, usually but not alwaysfinancial,for a definedperiod,often one year or a month. A budget may include anticipatedsalesvolumes andrevenues,resource quantities including time,costsandexpenses,environmental impacts such as greenhouse gas emissions, other impacts,assets,liabilitiesandcash flows.Companies, governments, families, and other organizations use budgets to expressstrategic plansof activities in measurable terms.

Preparing a budget allowscompanies,authorities,private entities orfamiliesto establish priorities and evaluate the achievement of their objectives. To achieve these goals it may be necessary to incur adeficit(expenses exceed income) or, on the contrary, it may be possible to save, in which case the budget will present asurplus(income exceed expenses).

In the field of commerce, a budget is also a financial document or report that details the cost that a service will have if performed. Whoever makes the budget must adhere to it and cannot change it if the client accepts the service.

A budget expresses intended expenditures along with proposals for how to meet them with resources. A budget may express asurplus,providing resources for use at afuturetime, or a deficit in which expenditures exceedincomeor other resources.

Comme Sisyphe– Honoré Daumier (Brooklyn Museum)

Government

Further information:Government budget

The budget of agovernmentis a summary or plan of the anticipated resources (often but not always from taxes) and expenditures of that government. There are three types of government budgets: the operating or current budget, the capital or investment budget, and the cash or cash flow budget.

By country

See also:Category:Government budgets by country

United States

Main article:United States federal budget

The federal budget is prepared by theOffice of Management and Budget,and submitted to Congress for consideration. Invariably, Congress makes many and substantial changes. Nearly all American states are required to havebalanced budgets,but the federal government is allowed to run deficits.

India

Main article:Union budget of India

The budget is prepared by the Budget Division Department of Economic Affairs of theMinistry of Financeannually. The Finance Minister is the head of the budget making committee. The present Indian Finance minister isNirmala Sitharaman.The Budget includes supplementary excess grants and when a proclamation by thePresidentas 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 first budget of India was submitted on 18 February 1860 byJames Wilson. P C Mahalanobisis known as the father of Indian budget.

Philippines

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), andzero-based budgeting.TheDepartment 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 thePhilippine 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 tovetothe 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: theline-item vetoand the veto of the whole budget.

Personal

Further information:Personal budget

A personal budget or home budget is afinance planthat allocates future personalincometowardsexpenses,savingsanddebtrepayment. Past spending andpersonal debtare 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. A third category (other than income and expenses) may be assets (such as property, investments, or other savings or value) representing a potential reserve for funds in case of budget shortfalls.

Corporate budget

Further information:Operating budget,Capital budgeting,andProduction budget

The budget of abusiness,division,orcorporation is afinancial forecastfor the near-term future, usually the nextaccounting period,aggregating theexpected revenuesand expenses of the various departments – operations,human resources,IT, etc. It is thus a key element inintegrated business planning,with measurable targetscorrespondingly devolvedto departmental managers (and becomingKPIs); budgets may then also specify non-cash resources, such as staff or time.

The budgeting processrequires considerable effort, often involving dozens of staff; final sign-off resides with both thefinancial directorandoperations director. The responsibility usually sits within the company'sfinancial managementarea in general, sometimes, specifically in "FP&A". Professionals employed in this role are often designated"Budget Analyst", a specializedfinancial analystfunction.

Organisations may producefunctional budgets, relating to activities, and / or cash budgets, focused on receipts and payments. Incremental budgeting starts with the budget from the previous period, while underzero-based budgetingactivities/costs are included only if justified. Under all approachesexpected salesor revenue, is typically the starting point;this will be based on thebusiness' planningfor the period in question. Directly related elementsand costsare typically linked to these (activity based costingmay be employed). Support and management functionsmay be revisited, and the resultant"fixed" costs,such as rent and payroll, will be adjusted, at a minimum, for inflation. Capital expenditure,both new investments and maintenance, may be budgeted separately; debt servicing and repayments likewise. The master budgetaggregates these all. SeeFinancial forecast,Cash flow forecast,Financial modeling § Accounting.

Whereas the budget is typically compiled on an annual basis - although, e.g. inmining, this may be quarterly - the monitoringis ongoing, with financialand operationaladjustments (or interventions) made as warranted; seeFinancial risk management § Corporate financefor further discussion. Here,if the actual figures delivered come close to those budgeted, this suggests that managers understand their business and have been successful in delivering. On the other hand, if thefigures divergethis sends an "out of control" signal; additionally, theshare price could sufferwhere these figures have beencommunicated to analysts.

Criticism is sometimes directed at the nature of budgeting, and its impact on the organization. Additional to the cost in time and resources, two phenomena are identified as problematic: First, it is suggested that managers will often"game the system"in specifying targets that are easily attainable, and / or in asking for more resources than required,such that the required resources will be budgeted as a compromise. A second observation is that managers' thinking may emphasize short term, operational thinking at the expense of a long term andstrategic perspective,particularly whenbonus paymentsare linked to budget. SeeStrategic planning § Strategic planning vs. financial planning.

Types of budgets

• 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.
• Conditional budgetingis a budgeting approach designed for companies with fluctuating income, highfixed costs,or income depending onsunk costs,as well asNPOsandNGOs.
• Marketing budget– an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.
• 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 ofrevenuereceipts ofgovernmentand the expenditure met from these revenues. Revenues are made up oftaxesand otherdutiesthat the government levies. Various countries andunionshave created four types of taxjurisdictions:interstate,state,localand tax jurisdictions with a special status (Free-trade zones). Each of them provides amoneyflow to the corresponding revenue budget levels.
• 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 judgement.
• 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– A budget type where every item added to the budget needs approval and no items are carried forward from the prior years budget. This type of budget has a clear advantage when the limited resources are to be allocated carefully and objectively. Zero based budgeting takes more time to create as all pieces of the budget need to be reviewed by management.
• Personal budget– A budget type focusing on expenses for self or for home, usually involves an income to budget.

External links

• The dictionary definition ofbudgetat Wiktionary
• Media related toBudgetat Wikimedia Commons
• Quotations related toBudgetat Wikiquote
• Origin of the word