In common terms budget can be termed as allocation of revenues towards the objectives and financial plans of an organization. The term ‘budget’ is pretty common for all of us , we see budgeting everywhere from our home, company, state and country. Union Budget in India is closely followed by millions as each plans and mentions in it affects the common citizen of our country. A budget can be individual oriented or it can be for an organization like company or institution. A specific plan is laid out mentioning the targets to be achieved at a specific period and the monetary funds allocated towards achieving that target.
In the budget, the capital investment, projected expenditure and the income or revenue forecast are mentioned. The budget on a whole will affect the working of that organization, for e.g. if a government decides to cut short a fund towards a certain sector, the working of that sector will get affected. If there is a war looming, government will allocate more funds in the budget for army. The persons who prepare the budget should be proactive and imaginative; they should keep in mind about the risk factors associated with it. In the case of a company, the budget may be depending on the market and production scenario
Budget Classification
- Period: This includes time strained budgets like short term, long term budgets
- Functional: This depends on what is the target area of the budget
- Conditional: This is divided into basic budgets and rolling budgets
- Activity: This depends on whether the budget is fixed or flexible
The main advantage of budgeting includes:
- Proper planning
- Increased business
- Division of responsibility
- Worker motivation
- Higher revenue
- Less wastage of production materials
To prepare for a budget is not an easy task and a committee should be setup carefully to estimate, scrutinize, approve and revise budgets from time to time.
Download Management Project Report on Budget .