Budget Definition

What is a Budget?

A budget is a financial plan which a business sets itself, it lays out the target financial outcome the business is aiming for.

Budgets are prepared for accounting periods, usually a month or a year, and set out the intentions and financial objectives for the forthcoming accounting period. For example, suppose a business is aiming for electricity costs to be 10,000 for the next year, this would be classified as an annual budget of 10,000.

The purpose of the budget is to set a target for the business to aim for, without a budget the business is aimless, like starting a journey before deciding where you are going.

Budgets are often confused with forecasts. A budget sets out where the business wants to go, a target, something to aim for. In contrast, a forecast sets out where the business is going, which may be nowhere near the target set.

There are various types of budgeting including zero based budgeting, flexible budgeting, and rolling budgets.

For further information see the Wikipedia definition.

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Budget Definition June 29th, 2016Team

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