What is Budget? What are its characteristics?
A budget is a financial document or an action plan which is prepared and used to project future income and expenses. It outlines an organisation’s financial and operational goals. It can also include non- monetary information with the monetary information. They need to be made and approved in advance of the year in which they are to be used or implemented.
Following are the characteristics of a good budget:
- It is expressed in quantitative or monetary terms.
- It is prepared for a fixed period of time It is prepared before the period in which it commences.
- Practical to implement.
- It spells out the objects and the policies to be pursued in order to achieve the objective of the organisation.
- Many people are involved in drawing up a budget.
- Flexible enough to allow changes in the changing environment.
- Prepared on the basis of established standards of performance.
- Analysis of cost and revenues.
- On the basis of budget report performance of the organisation is constantly monitored.