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March 13, 2009

What is a budget?

A budget is a plan expressed in dollar amounts that acts as a road map to carry out an organization’s objectives, strategies and assumptions.

A company might have a master budget or profit plan for the upcoming year. The master budget will include a projected income statement and balance sheet. Within the master budget will be operating budgets such as a sales budget, production budget, marketing budget, administrative budget, and budgets for departments. In addition there will be a cash budget and a capital expenditures budget.

It is common that the budgets prepared for the next accounting year will be detailed by quarter and/or by month. It is also typical that the annual budget will not be changed once the actual year begins. Good managers realize that a budget is a guide and that it cannot be so rigid that it prevents timely action when needed. In rare circumstances the annual budget might be revised, but only when the business environment has radically changed.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.



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Comments

22 Responses to “What is a budget?”

  1. william on March 19th, 2009 6:26 am

    Dear Sir,
    kindly up date me about detail information of budget
    Thanks

  2. Erica on March 23rd, 2009 2:37 am

    Dear Sir,

    please help explain the difference revenue,turnover,sales and income.
    Thanks,

  3. Annie on April 1st, 2009 11:54 am

    This is an incredible Site!
    I’m constantly impressed with what you can learn here!
    Thank you for providing such an amazing service to people who didn’t jump into college and earn a degree!!!

  4. Latiff on April 1st, 2009 10:38 pm

    hello sir,
    Thanks for u r explanations and this is very useful for me in my work. And i want to know the difference between provision, reserve and allowance for doubtful debts. i am grateful to you and your service.Thank you.

  5. mohammed taher oshiek on April 3rd, 2009 1:29 am

    Your explaination of the budget is exrely valuable to me .Indeed,your efforts are highly appreciated.

  6. Luisa Greimel on April 4th, 2009 10:46 am

    Este sitio me es de gran utilidad yo estudié Contaduria en México y estoy tratando de entenderlo me esta siendo un poco dificil pero le voy a poner fuerza a mi estudio… Gracias

  7. Fran on April 7th, 2009 11:16 am

    Would like to know more about Budget Forecasting. How does “forecasting” differ from “planning” a budget? or does it?

  8. kamran on April 9th, 2009 3:37 am

    Dear sir, plz explain the difference between stockholder and stackholder.

  9. Joseph Uisso Makara on April 10th, 2009 10:17 am

    Dear Sir,
    -kindly up date me about detail information of budget
    -please help explain the difference revenue,turnover,sales and income

  10. Emmanuel on April 16th, 2009 11:35 am

    Please, give the 9 Responses concerning Budget to me

  11. Rasheedat on May 5th, 2009 6:45 am

    pls i need more information on budget

  12. smither on August 31st, 2009 1:52 pm

    IN general how is management accounting tools important for managers to make proper decisions for the business?

  13. Maisam on September 6th, 2009 12:25 am

    Dear Sir/Madam;

    thanks for your information, would you please give Information in detail about budget and basic steps in budgeting.
    thanks

  14. Zia on October 25th, 2009 10:16 pm

    Thank you so much, I’m going to school for management but the accounting courses are leaving me lost and alone. Your site has been so helpful, it’s amazing. Thanks again.

  15. Gurmani on October 28th, 2009 3:29 am

    Sir,

    Thanx for helping me know about variance.

  16. Junie on October 29th, 2009 2:58 pm

    Could you please give me an example on Cash Budget.

  17. H on October 30th, 2009 7:17 pm

    Pleases give me an example of a cash budget

  18. H on October 30th, 2009 7:18 pm

    example of a cash budget

  19. moses on December 4th, 2009 9:48 am

    Hey coach i would like to say thanks very much for the work you are doing,you are making my work easier

  20. siddiqui on December 10th, 2009 3:46 am

    again thanks.excellent!

  21. Shrestha S. on January 9th, 2010 4:17 am

    Dear sir,

    I found very useful information and matters about accounting which may help my carrier and profession.

    Very very thanks

    Sunit

  22. Mahmoud on March 10th, 2010 12:02 am

    What does mean Kaizen Budget & Zero-based Budgeting ?
    Thanks

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