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A budget is a calculation plan, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environmental impacts such as greenhouse gas emissions, other impacts, assets, liabilities and cash flows. Companies, governments, families, and other organizations use budgets to express strategic plans of activities in measurable terms. [1]


A budget expresses intended expenditures along with proposals for how to meet them with resources. A budget may express a surplus, providing resources for use at a future time, or a deficit in which expenditures exceed income or other resources.

Comme Sisyphe - Honore Daumier (Brooklyn Museum) Brooklyn Museum - Comme Sisyphe - Honore Daumier.jpg
Comme Sisyphe – Honoré Daumier (Brooklyn Museum)


The budget of a government is 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. [2]

By country

United States

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. [3]


The budget is prepared by the Budget Division Department of Economic Affairs of the Ministry of Finance annually. The Finance Minister is the head of the budget making committee. The present Indian Finance minister is Nirmala Sitharaman. The Budget 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.[ citation needed ] The first budget of India was submitted on 18 February 1860 by James Wilson. P C Mahalanobis is known as the father of Indian budget.


The 2022–23 Iranian national budget is the latest one. Documents related to budget program are not released. [4]


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 (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 whole budget. [5]


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. 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

The budget of a business, division, or corporation [6] [7] [1] [8] is a financial forecast for the near-term future, usually the next accounting period, aggregating the expected revenues and expenses of the various departments – operations, human resources, IT, etc. It is thus a key element in integrated business planning, with measurable targets correspondingly devolved to departmental managers (and becoming KPIs [1] ); budgets may then also specify non-cash resources, such as staff or time. [1]

The budgeting process requires considerable effort, [6] often involving dozens of staff; final sign-off resides with both the financial director and operations director. The responsibility usually sits within the company's financial management area in general, sometimes, specifically in "FP&A". Professionals employed in this role are often designated "Budget Analyst", [9] a specialized financial analyst function.

Organisations may produce [8] functional budgets, relating to activities, and / or cash budgets, focused on receipts and payments. Incremental budgeting starts with the budget from the previous period, while under zero-based budgeting activities/costs are included only if justified. Under all approaches expected sales or revenue, is typically the starting point; [8] this will be based on the business' planning for the period in question. Directly related elements and costs are typically linked to these (activity based costing may be employed). Support and management functions may 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 budget [8] aggregates these all. See Financial forecast, Cash flow forecast, Financial modeling § Accounting.

Whereas the budget is typically compiled on an annual basis - although, e.g. in mining, [10] this may be quarterly - the monitoring is ongoing, with financial and operational adjustments (or interventions) made as warranted; see Financial risk management § Corporate finance for further discussion. Here, [8] 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 the figures diverge this sends an "out of control" signal; additionally, the share price could suffer where these figures have been communicated to analysts.

Criticism is sometimes directed at the nature of budgeting, and its impact on the organization. [11] [12] 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, [8] 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 and strategic perspective, particularly when [13] bonus payments are linked to budget. See Strategic planning § Strategic planning vs. financial planning.

Types of budgets

Related Research Articles

<span class="mw-page-title-main">Financial statement</span> Formal record of the financial activities and position of a business, person, or other entity

Financial statements are formal records of the financial activities and position of a business, person, or other entity.

An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture, or an automobile is often referred to as an expense. An expense is a cost that is "paid" or "remitted", usually in exchange for something of value. Something that seems to cost a great deal is "expensive". Something that seems to cost little is "inexpensive". "Expenses of the table" are expenses for dining, refreshments, a feast, etc.

<span class="mw-page-title-main">Public finance</span> Study of the role of government within the economy

Public finance is the study of the role of the government in the economy. It is the branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones. The purview of public finance is considered to be threefold, consisting of governmental effects on:

  1. The efficient allocation of available resources;
  2. The distribution of income among citizens; and
  3. The stability of the economy.
<span class="mw-page-title-main">Income statement</span> Type of financial statement

An income statement or profit and loss account is one of the financial statements of a company and shows the company's revenues and expenses during a particular period.

<span class="mw-page-title-main">Earnings before interest, taxes, depreciation and amortization</span> Accounting measure of a companys profitability

A company's earnings before interest, taxes, depreciation, and amortization is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base. It is derived by subtracting from revenues all costs of the operating business but not decline in asset value, cost of borrowing, lease expenses, and obligations to governments.

<span class="mw-page-title-main">Cash flow statement</span> Financial statement

In financial accounting, a cash flow statement, also known as statement of cash flows, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in and out of the business. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. International Accounting Standard 7 is the International Accounting Standard that deals with cash flow statements.

In financial accounting, free cash flow (FCF) or free cash flow to firm (FCFF) is the amount by which a business's operating cash flow exceeds its working capital needs and expenditures on fixed assets. It is that portion of cash flow that can be extracted from a company and distributed to creditors and securities holders without causing issues in its operations. As such, it is an indicator of a company's financial flexibility and is of interest to holders of the company's equity, debt, preferred stock and convertible securities, as well as potential lenders and investors.

The United States Navy Working Capital Fund (NWCF) is a branch of the family of United States Department of Defense (DoD) Working Capital Funds. The NWCF is a revolving fund, an account or fund that relies on sales revenue rather than direct Congressional appropriations to finance its operations. It is intended to generate adequate revenue to cover the full costs of its operations, and to finance the fund's continuing operations without fiscal year limitation. A revolving fund is intended to operate on a break-even basis over time; that is, it neither makes a profit nor incurs a loss.

In financial accounting, operating cash flow (OCF), cash flow provided by operations, cash flow from operating activities (CFO) or free cash flow from operations (FCFO), refers to the amount of cash a company generates from the revenues it brings in, excluding costs associated with long-term investment on capital items or investment in securities. Operating activities include any spending or sources of cash that’s involved in a company’s day-to-day business activities. The International Financial Reporting Standards defines operating cash flow as cash generated from operations, less taxation and interest paid, gives rise to operating cash flows. To calculate cash generated from operations, one must calculate cash generated from customers and cash paid to suppliers. The difference between the two reflects cash generated from operations.

<span class="mw-page-title-main">Financial plan</span> Evaluation of ones financial state

In general usage, a financial plan is a comprehensive evaluation of an individual's current pay and future financial state by using current known variables to predict future income, asset values and withdrawal plans. This often includes a budget which organizes an individual's finances and sometimes includes a series of steps or specific goals for spending and saving in the future. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan is sometimes referred to as an investment plan, but in personal finance, a financial plan can focus on other specific areas such as risk management, estates, college, or retirement.

<span class="mw-page-title-main">United States federal budget</span> Budget of the U.S. federal government

The United States budget comprises the spending and revenues of the U.S. federal government. The budget is the financial representation of the priorities of the government, reflecting historical debates and competing economic philosophies. The government primarily spends on healthcare, retirement, and defense programs. The non-partisan Congressional Budget Office provides extensive analysis of the budget and its economic effects. CBO estimated in February 2024 that Federal debt held by the public is projected to rise from 99 percent of GDP in 2024 to 116 percent in 2034 and would continue to grow if current laws generally remained unchanged. Over that period, the growth of interest costs and mandatory spending outpaces the growth of revenues and the economy, driving up debt. Those factors persist beyond 2034, pushing federal debt higher still, to 172 percent of GDP in 2054.

A government budget is a projection of the government's revenues and expenditure for a particular period of time often referred to as a financial or fiscal year, which may or may not correspond with the calendar year. Government revenues mostly include taxes while expenditures consist of government spending. A government budget is prepared by the government or other political entity. In most parliamentary systems, the budget is presented to the legislature and often requires approval of the legislature. Through this budget, the government implements economic policy and realizes its program priorities. Once the budget is approved, the use of funds from individual chapters is in the hands of government ministries and other institutions. Revenues of the state budget consist mainly of taxes, customs duties, fees and other revenues. State budget expenditures cover the activities of the state, which are either given by law or the constitution. The budget in itself does not appropriate funds for government programs, hence need for additional legislative measures. The word budget comes from the Old French bougette.

<span class="mw-page-title-main">Fund accounting</span> An accounting system used for special reporting requirements

Fund accounting is an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, or other individuals or organisations or by law. It emphasizes accountability rather than profitability, and is used by Nonprofit organizations and by governments. In this method, a fund consists of a self-balancing set of accounts and each are reported as either unrestricted, temporarily restricted or permanently restricted based on the provider-imposed restrictions.

Valuation using discounted cash flows is a method of estimating the current value of a company based on projected future cash flows adjusted for the time value of money. The cash flows are made up of those within the “explicit” forecast period, together with a continuing or terminal value that represents the cash flow stream after the forecast period. In several contexts, DCF valuation is referred to as the "income approach".

A financial forecast is an estimate of future financial outcomes for a company or project, usually applied in budgeting, capital budgeting and / or valuation. Depending on context, the term may also refer to listed company (quarterly) earnings guidance. For a country or economy, see Economic forecast.

<span class="mw-page-title-main">Cash flow forecasting</span>

Cash flow forecasting is the process of obtaining an estimate of a company's future cash levels, and its financial position more generally. A cash flow forecast is a key financial management tool, both for large corporates, and for smaller entrepreneurial businesses. The forecast is typically based on anticipated payments and receivables. Several forecasting methodologies are available.

Financial management is the business function concerned with profitability, expenses, cash and credit. These are often grouped together under the rubric of maximizing the value of the firm for stockholders. The discipline is then tasked with the "efficient acquisition and deployment" of both short- and long-term financial resources, to ensure the objectives of the enterprise are achieved.

<span class="mw-page-title-main">Strategic financial management</span> Study of finance of an enterprise

Strategic financial management is the study of finance with a long term view considering the strategic goals of the enterprise. Financial management is sometimes referred to as "Strategic Financial Management" to give it an increased frame of reference.

<span class="mw-page-title-main">Corporate finance</span> Framework for corporate funding, capital structure, and investments

Corporate finance is the area of finance that deals with the sources of funding, and the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources. The primary goal of corporate finance is to maximize or increase shareholder value.


  1. 1 2 3 4 "CIMA Official Terminology" (PDF). Archived from the original (PDF) on 2013-08-10.
  2. 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 Archived 2012-11-05 at the Wayback Machine
  3. "Constitutional Balanced Budget Amendment Poses Serious Risks". Center on Budget and Policy Priorities. Retrieved 2022-07-13.
  4. tasnimnews.com
  5. "§015l. (CB) Line Item Veto". Budget Counsel. 2016-11-15. Retrieved 2022-07-13.
  6. 1 2 Jonas Elmerraji (2021). How Budgeting Works for Companies, investopedia.com
  7. Edriaan Koening (N.D.) What is Corporate Budgeting?, chron.com
  8. 1 2 3 4 5 6 Rosemarie Kelly (2019). "Budgeting" Institute of Certified Public Accountants in Ireland
  9. Budget Analysts Archived 2020-11-09 at the Wayback Machine , Bureau of Labor Statistics
  10. Mining Financial Basics
  11. Loren Gary (2003). Why Budgeting Kills Your Company, Harvard Management Update, May 2003.
  12. Michael Jensen (2001). Corporate Budgeting Is Broken, Let's Fix It, Harvard Business Review, pp. 94-101, November 2001.
  13. "Bonuses: Short-Term Incentives". Retrieved from www.businessballs.com
  14. Мarynchak, Yevhеn (2019). THE FINANCIAL NEXUS BETWEEN AN INDIVIDUAL AND A STATE. PUBLIC FINANCE: LEGAL ASPECTS: Collective monograph. Riga: Baltija Publishing. p. 130. ISBN   9789934571824. Archived from the original on 2022-01-03. Retrieved 2022-01-09.