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For the rental car company, see Budget Rent a Car. For the car insurance company Budget, see Budget Group of Companies.

A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organizations, activities or events in measurable terms.[1]

Brooklyn Museum - Comme Sisyphe - Honoré Daumier


A budget (derived from old French word bougette, purse) is a quantified financial plan for a forthcoming accounting period.[2]

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.


Budget helps to aid the planning of 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 co-ordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments. Budgets help on every aspect of the production market chain, by enabling both businesses, governments and consumers to have better spending power and accountability for their earnings.

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
  • For accountability

In summary, the purpose of budgeting is tools:

  1. 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.
  2. Tools enable the actual financial operation of the business to be measured against the forecast.
  3. Lastly, tools establish the cost constraint for a project, program, or operation.

An average budget would showcase the subject’s income and the venues it is allocated from, such as wages and tips; income from bank account interest; any possible dividends; gifts received; purchase refunds and reimbursements and on the other end the applicable expenses that are subtracted routinely from these income sources.[3] Budgeting focuses on finding efficient balances to satisfy expenses while maximizing retained profits and in the process, creating wealth. Budgets may need to be fine tuned or reassessed due to changes in income,changes in expenses, changes in the subject’s exterior environment that affect either of the two principles. These changes make a budget flexible which is a necessity in order for it to remain a plausible and effective template of the right financial decisions.

Business start-up budget[edit]

The process of calculating the costs of starting a small business begins with a list of all necessary purchases including tangible assets (for example, equipment, inventory) and services (for example, remodeling, insurance), working capital, sources and collateral. The budget should contain a narrative explaining how you decided on the amount of this reserve and a description of the expected financial results of business activities. The assets should be valued with each and every cost. All other expenses are like labour factory overhead all freshmen expenses are also included into business budgeting.

Corporate budget[edit]

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. Small businesses and large corporations although very distant on many scales, find budgets vital for maintaining competitively low production costs, costs that are brought down to the consumer, low fixed costs and labor to maximize quarterly profits.

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.

Event management budget[edit]

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.

Government budget[edit]

For more details on this topic, see Government budget.

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.[4] The concept of controlled government spending is very familiar with annual budgets on the federal, state and city level. These changes usually receive continuous publicity mostly due to budget deficits and its consistent repercussion - budget cuts - that influence many publicly available services.

United Kingdom[edit]

The budget is prepared by the Treasury team lead by the Chancellor of the Exchequer and is presented to Parliament by the Chancellor of the Exchequer on 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 Red 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, (The Government), the Whips will ensure that is it passed as written by the Chancellor.

United States[edit]

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 budget is prepared by the Budget Division of 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 railway budget is presented separately by the Ministry of Railways. Thus budget is presented in two categories: The General Budget and The Railway Budget


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 prepares the National Expenditure Program and forwards it to the Committee on Appropriations of the House of Representative 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 whole budget.

Personal or family budget[edit]

For more details on this topic, see Personal budget.

In a personal or family budget all sources of income (inflows) are identified and expenses (outflows) are planned with the intent of matching outflows to inflows (making ends meet). In consumer theory, the equation restricting an individual or household to spend no more than its total resources is often called the budget constraint. Households are able to optimize their earnings through smart spending habits and frugality by using a detailed financial budget to achieve a similar outcome to a firm’s optimal financial efficiency plan.

Elements of a personal or family budget usually include, fixed expenses, monthly payments, insurance, entertainment, and savings.

Some of these concepts can be hard to understand, but many websites now provide free financial advice for the age of the self-aware. There are many informational sites and software available for use in personal and family budgeting. The new professionals of the world differ from older generations who had to rely on individuals and teams of financial experts in order to be informed about the best and most individually adequate financial decisions. Due to the great need and the changing times, there are many websites catered to free investment, retirement, and financial advice that all underline the importance of budgeting wisely and the need to tailor a budget appropriately to the individuals specific financial situation.

There are notable success stories of individuals that have stuck strongly to their personalized budgets and ended up being remarkable stories of early retirement before they even reach their 40’s, while the average american retires in their 60’s.[5] The "Mr.Money Mustache" blogger Pete Aedeny and his wife, retired when they were 30,[6] while Akasha and Billy Kaderli retired when they were both 38,[7] both truly exceptional examples of discipline, great strategy and even good timing.

Budget types[edit]

  • Sales budget – an estimate of future sales, often broken down into both units and currency. It is used to create company 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 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 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 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.
  • Participatory budget - A ground breaking transformation in budgeting formats is gaining strength worldwide with noticeable results especially in its successful implementations in Brazil.[8] This new strategy has exponentially improved overall public awareness, satisfaction and even democratic relations between the people and their government leaders. Many other countries, organizations, and institutions have begun adopting participatory budgeting, which puts a whole new spin on the definition of budgets and what we have come to expect it to mean.

See also[edit]


  1. ^ "CIMA Official Terminilogy". 
  2. ^ Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 502. ISBN 0-13-063085-3. 
  3. ^ "Free Personal Budget Spreadsheet." Vertex42.com. Vertex42 LLC, 4 Apr. 2014. Web. 10 Mar. 2015. <http://www.vertex42.com/ExcelTemplates/personal-budget-spreadsheet.html>.
  4. ^ Cliche, P. (2012). “Budget,” in L. Côté and J.-F. Savard (eds.), Encyclopedic Dictionary of Public Administration, [online], http://www.dictionnaire.enap.ca/Dictionnaire/en/home.aspx
  5. ^ Riffkin, Rebecca. "Average U.S. Retirement Age Rises to 62." Average U.S. Retirement Age Rises to 62. Gallup. Web. 24 Mar. 2015. <http://www.gallup.com/poll/168707/average-retirement-age-rises.aspx>.
  6. ^ Johnson, Kelly. "Meet Mr. Money Mustache, the Man Who Retired at 30." Washington Post. The Washington Post, 26 Apr. 2013. Web. 24 Mar. 2015. <http://www.washingtonpost.com/business/meet-mr-money-mustache-the-man-who-retired-at-30/2013/04/26/71e3e6a8-acf3-11e2-a8b9-2a63d75b5459_story.html>.
  7. ^ Brokamp, Robert. "Extreme Early Retirement in Practice: How Two People Did It." Get Rich Slowly. Getrichslowly.org, 15 Aug. 2011. Web. 24 Mar. 2015. <http://www.getrichslowly.org/blog/2011/08/11/extreme-early-retirement-in-practice-how-two-people-did-it/>.
  8. ^ Spada, Paola, and Hollie Russon Gilman. "Budgets for the People - Brazil's Democratic Innovations." Foreign Affairs. Council on Foreign Relations, Inc., 11 Mar. 2015. Web. 24 Mar. 2015. <http://www.foreignaffairs.com/articles/143245/paolo-spada-and-hollie-russon-gilman/budgets-for-the-people>

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