Budget
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Budget (from French bougette, purse) generally refers to a list of all planned expenses and revenues. 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.
In summary, the purpose of budgeting is to:
- Provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out.
- Enable the actual financial operation of the business to be measured against the forecast.
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[edit] Business start-up budget
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.
[edit] Corporate budget
The budget of a company is compiled annually. A finished budget usually requires considerable effort and can be seen as a financial plan for the new financial year. While traditionally the Finance department compiles the company's budget, modern software allows hundreds or even thousands of people in various departments (operations, human resources, IT etc) to contribute their expected revenues and expenses to the final budget.
If the actual numbers delivered through the financial year turn 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 actuals diverge wildly from the budget, this sends an 'out of control' signal, and the share price could suffer as a result.
[edit] Event management budget
A budget and planning tool to assist in calculating and meeting the costs associated with a business or social event. It is a fundamental tool that enables the event director to predict with reasonable accuracy whether the event will result in a profit, a loss or will break-even.In addition to the above a budget can be used as a pricing tools..
[edit] Government budget
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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. The United States 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.
The United Kingdom budget is prepared by the Chancellor of the Exchequer, the second most important member of the government, and must be passed by Parliament. Parliament seldom makes changes to the budget.
[edit] Personal or family budget
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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.
[edit] Budget types
Sales budget: The sales budget is an estimate of future sales, often broken down into both units and dollars. It is used to create company sales goals.
Production budget: Product oriented companies create a production budget. It is an estimate of the number of units that must be manufactured in order to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, such as labor, material, and other expenses.
Cash Flow/Cash budget: The cash flow budget is 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: The marketing budget is an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.
Project budget: The project budget is a prediction of the costs associated with a particular company project. These costs include labor, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each.
Revenue budget: The 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 Union government levies.
Expenditure budget: A budget type which includes spending data items.
