Budget

Origin

Middle English bowgette, from Middle French bougette, diminutive of bouge leather bag, from Latin bulga, of Celtic origin; akin to Middle Irish bolg bag; akin to Old English belg bag

• 15th Century

Definitions

• 1chiefly dialect : a usually leather pouch, wallet, or pack; also : its contents
• 2: stock, supply
• 3: a quantity (as of energy or water) involved in, available for, or assignable to a particular situation; also : an account of gains and losses of such a quantity <the global carbon budget>
• 4a : a statement of the financial position of an administration for a definite period of time based on estimates of expenditures during the period and proposals for financing them

b : a plan for the coordination of resources and expenditures

c : the amount of money that is available for, required for, or assigned to a particular purpose

Description

A budget (from old French bougette, purse) is a list of all planned expenses and revenues. It is a plan for saving and spending. 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.

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 which estimates 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.

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 government levies.

Expenditure budget: A budget type which include of spending data items.[1]