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What Is Budget ?: Sales Budget Production Budget - An Estimate of The Number of Units That Must Be Manufactured To Meet
What Is Budget ?: Sales Budget Production Budget - An Estimate of The Number of Units That Must Be Manufactured To Meet
What Is Budget ?: Sales Budget Production Budget - An Estimate of The Number of Units That Must Be Manufactured To Meet
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 terms. 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.
TYPE OF BUDGETS
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 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 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..
"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.
Budget in 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. James Wilson on 7 April 1860 and after independence,
India's 1st Finance Minister R.K. Shanmukham Chetty presented the 1st budget on 26th
November, 1947. Liaquat Ali Khan was represents an interim government union budget before
the independence of India. 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.
Government Budget
A government budget is an annual financial statement presenting the government's
proposed revenues and spending for a financial year that is often passed by the legislature,
approved by the chief executive or president and presented by the Finance Minister to the nation.
The budget is also known as the Annual Financial Statement of the country. This document
estimates the anticipated government revenues and government expenditures for the ensuing
(current) financial year. 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.
Classification
A budget can be of 3 types:
Balanced Budget: When government receipts are equal to the government expenditure, it is
called a balanced budget.
Deficit Budget: When government expenditure exceeds government receipts, the budget is
said to be deficit. A deficit can be of 3 types, Revenue, Fiscal and Primary deficit.
Surplus: When government receipts are more than expenditure.
A budget can be classified in 3 categories which are:
according to Function
according to Flexibility
Need and importance of government budget
Government Budget is a subject of immense importance for a variety of reasons