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From Wikipedia, the free encyclopedia

A budget (from French bougette, purse) is generally a list of all planned expenses and revenues. It is a plan for saving and spending.[1] 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:

  1. 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.
  2. Enable the actual financial operation of the business to be measured against the forecast.


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.

Corporate budget

The budget of a company is often compiled annually, but may not be. A finished budget, usually requiring considerable effort, is a plan for the short-term future, typically one year (see Budget 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 list their expected revenues and expenses in the final budget.

If the actual figures delivered through the budget period 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.

Event management budget

A budget is a fundamental tool for an event director to predict with reasonable accuracy whether the event will result in a profit, a loss or will break-even. A budget can also be used as a pricing tool.

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.

Personal or family 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.

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.

See also


  1. ^ Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 502. ISBN 0-13-063085-3.  

External links


1911 encyclopedia

Up to date as of January 14, 2010

From LoveToKnow 1911

BUDGET (originally from a Gallic word meaning sack, latinized as bulga, leather wallet or bag, thence in O. Fr. bougette, from which the Eng. form is derived), the name applied to an account of the ways and means by which the income and expenditure for a definite period are to be balanced, generally by a finance minister for his state, or by analogy for smaller bodies .2 The term first came into use in England about 1760. In the United Kingdom the chancellor of the exchequer, usually in April, lays before the House of Commons a statement of the actual results of revenue and expenditure in the past finance year (now ending March 31), showing how far his estimates have been realized, and what surplus or deficit there has been in the income as compared with the expenditure. This is accompanied by another statement in which the chancellor gives an estimate of what the produce of the revenue may be in the year just entered upon, supposing the taxes and duties to remain as they were in the past year, and also an estimate of what the expenditure will be in the current year. If the estimated revenue, after allowing for normal increase of the principal sources of income, be less than the estimated expenditure, this is deemed a case for the imposition of some new, or the increase of some existing, tax or taxes. On the other hand, if the estimated revenue shows a large surplus over the estimated expenditure, there is room for remitting or reducing some tax or taxes, and the extent of this relief is generally limited to the amount of surplus realized in the previous year. The chancellor of the exchequer has to take parliament into confidence on his estimates, both as regards revenue and expenditure; and these estimates are prepared by the various departments of the administration. They are divided into two parts, the consolidated fund services and the supply services, the first comprising the civil list, debt. charge, pensions and courts of justice, while the "supply" includes the remaining expenditure of the country, as the army,. the navy, the civil service and revenue departments, the post office and telegraph services. The consolidated fund services are an annual charge, fixed by statute, and alterable only by statute, but the supply services may be gone through in detail, item by item, by the House of Commons, which forms itself into a committee of supply for the purpose. These items can be criticized, and reduced (but not increased) by amendments proposed by private members. The committee of ways and means (also a committee of the whole House) votes the supplies when granted and originates all taxes. The resolutions of these committees are reported to the House, and when the taxation and expenditure obtain the assent of parliament, the results as thus adjusted become the final budget estimate for the year, and are passed as the Finance Act. This system of annual review and adjustment of the public finances obtains not only in the British colonies, but in British India. The Indian budget, giving the results of income and expenditure in the year ending 31st of December, and the prospective estimates, is laid before the imperial parliament in the course of the ensuing session.

The budget, though modified by different forms, has also long been practised in France, the United States, and other constitutional countries, and has in some cases been adopted by autocratic Powers. Russia began the publication of annual budgets in 1866; Egypt has followed the example; so also has Turkey, by an imperial decree of 1875. All countries agree in taking a yearly period, but the actual date of commencement varies. considerably. The German and Danish financial year, like that of the United Kingdom, begins on the ist of April; in France,. Belgium and Austria, it begins on the ist of January; in Italy,. Spain, the United States and Canada, on the 1st of July.

2 It was a name applied also to a leather-covered case or small coffer. Cotgrave translates bougette " a little coffer or trunk. covered with leather." It became a common word for a despatch box in which official papers were kept. The chancellor of the exchequer thus was said to "open his budget" when he made his annual statement.

Previously to 1832, however, the English financial year ran from the 1st of January to the 3 ist of December.

It may be mentioned that Disraeli introduced a budget (on which he was defeated) in the autumn of 1852; and in 1860, owing to the ratification of the commercial treaty with France, the budget was introduced on the 10th of February. In 1859, through a change of administration, the budget was not introduced until the 18th of July, while in 1880 there were two budgets, one introduced in March under Disraeli's administration, and the other in June, under Gladstone's administration.

National budgets are to be discriminated (r) as budgets passing under parliamentary scrutiny and debate from year to year, and (2) budgets emitted on executive authority. In most constitutional countries the procedure is somewhat of a mean between the extremes of the United Kingdom and the United States. In the United Kingdom the budget is placed by the executive before the whole House, without any previous examination except by the cabinet, and it is scrutinized by the House sitting as a committee; in the majority of countries, however, the budget undergoes a preliminary examination by a specially selected committee, which has the power to make drastic changes in the proposals of the executive. In the United States, on the other hand, the budget practically emanates from Congress, for there is no connexion between the executive and the legislative departments. The estimates prepared by the various executive departments are submitted to the House of Representatives by the secretary of the treasury. With these estimates two separate committees deal. The committee on ways and means deals with taxation, and the committee on appropriations with expenditure. The latter committee is divided into various sub-committees, each of which brings in an appropriation bill for the department or subject with which it is charged.

There are also, in all the greater countries, local and municipal taxations and expenditures of only less account than the national. In federal governments such as the United States, the German empire, or the Argentine republic, the budgets of the several states of the federation have to be consulted, as well as the federal budgets, for a knowledge of the finances.


Stourm, Le Budget, son histoire et son mecanisme (1889), which gives a comparative study of the budgets of different countries, is the best book upon the subject. See also Siedler, Budget and Budgetrecht (1885); Sendel, Ober Budgetrecht (1890); Besson, Le Controle des budgets en France et a l'etranger (1899) Bastable, Public Finance (3rd ed., 1903); Eugene E. Agger, The Budget in American Commonwealths (New York, 1907).

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Up to date as of January 15, 2010

Definition from Wiktionary, a free dictionary

See also budget


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Budget n. (genitive Budgets, plural Budgets)

  1. budget


Simple English

A budget is an account of the estimated revenue and estimated expenditure within a fiscal year.

There are three types of budgets:

  • Surplus budget
  • deficit budget
  • balanced budget

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