Budget - Types of Budgets A budget is a detailed plan of operations that is predetermined for a particular period. Budgets are quantitative or financial statements prepared for the purpose of attaining a particular objective. Budgeting Process Budgeting is the formal procedure of preparing budgets. It involves the following basic steps: Identifying expenses Determining different sources of income Preparing the budget Establishing the budget period Laying down the budget procedure Allocating income for expenses Monitoring the efficiency of the budget Re-assessing the budget National Budget National budgets are legal documents, which are provided by legislatures before being passed by the executive head of the nation, such as the president, prime minister or other chief official of a nation. The budgeting process of a nation involves: Classifying expenses: The expenses allocated in a government budget include consumption and investment expenditure on infrastructure development and research and development. It also includes transfer payments, such as social security and unemployment benefits. Revenue determination: The primary source of revenue generation for a government budget is taxes. Preparing budgets: A government budget may be for a quarter, a year, five years or ten years. The period of the budget and the procedure of revenue allocation are exclusively mentioned by the government. Examples of specific country budgeting processes, such as those in US, Canada, UK, Germany, Australia, New Zealand, Japan, India and Brazil, are detailed at the end of this article. Company Budget A company budget is prepared by the owner and shareholders of the company. It may also be prepared with the inputs of other stakeholders, such as employees and creditors. The budgeting process of a company involves: Categorizing Expenses: Business expenses include capital expenditure on acquisition and modification of assets and revenue expenditure on routine activities such as payment of electricity and rent. Revenue calculation: Sources of business revenue include capital, borrowed funds and sale of goods. Budget preparation: This is generally prepared for a financial year. The purpose of the budget is to allocate funds for various business activities, such as production and distribution. Personal Budget A personal budget is prepared by individuals and families to allocate income for various expenses, savings, investments and other financial obligations, such as debts. A personal budget is prepared by: Organizing expenses: Personal expenses include expenditure on present consumption or future savings and investments. This includes incorporation of travel and leisure expenses and savings for the education fund of children. Revenue summation: An individual earns an income from a number of sources, including salary, social security, worker’s compensation and rent collection. Budget preparation: This is generally prepared on a weekly or monthly basis. The idea of a personal budget is to allocate income for various expenses, while setting aside a portion for savings. The budgeting process of governments, companies and individuals involves re-evaluation and revision of the budget. The budget is periodically monitored with respect to established targets and results obtained. Shortcomings in the outcome are evaluated and necessary modifications are made in the future budget to avoid unnecessary expenses. Country Budgets US Budget United States government budget is a federal document submitted by U.S. president to Congress not earlier than first Monday of January and not later than February’s first Monday. US budget is for following fiscal year beginning 1st October. Budget resolutions are developed separately by Senate and House budget committees, which provide spending limits for different subcommittees of Senate and House Appropriations Committees. Subsequently, these Appropriations Committees approve appropriation bills allocating funds for different federal programs. After being approved by Congress these appropriation bills are sent to President for his signature into a law. President might also veto that bill, which once again is placed before Congress who in turn can pass it into a law by passing it by two-thirds majority in each chamber. U.S. President may also request Congress to pass supplementary or emergency appropriation bills. Budget data and analysis are provided by Congressional Budget Office, U.S. Treasury Department, Government Accountability Office, and Office of Management and Budget. Canada Budget Canadian federal budget is presented annually and released in February or March for forthcoming fiscal year from 1st April to 31st March. This budget announced by Minister of Finance in House of Commons is put to vote. It is important that budget receives votes of members of House of Commons. This being a confidence measure, counter-voting can result in collapse of ruling government. Provincial budgets, dependent on money received from federal government, are released after acceptance of federal budget. UK Budget UK budgeting procedure deals with receipts of Her Majesty’s Customs and Revenue and expenditure of public sector departments. Annual budget in UK is from 6th April of one financial year to 5th April of next financial year. Germany Budget Budget of Germany is passed by Bundestag for a period of one or two years. Expenses and revenues are calculated for each single ministry and other administrative units for fiscal period extend from 1st January to 31st December. This budget is enacted before commencement of a fiscal year. Australia Budget Federal budget in Australia is initiated in November with Accrual Information Management System meeting their Prime Minister, Federal Treasurer, Minister for Administration and Finance. This Senior Ministers’ Review determines budget submissions of different portfolios to Cabinet. Thereafter in March, an Expenditure Review Committee meets to consider all budgetary submissions. Commonwealth Treasurer on second Tuesday of May or ‘budget night’ presents budget at Parliament House. Australian budget is effective for fiscal period 1st July of a fiscal to 30th June next year. New Zealand Budget Budget in New Zealand is presented by their finance minister in New Zealand House of Representatives. Budget process in New Zealand is divided into a number of phases: i) Strategic Phase wherein all targets for revenues, expenditures, public debt and fiscal surplus are set; ii) Initiatives Phase where budget submissions are reviewed; iii) Parliamentary Phase entails garnering parliamentary support for this budget package; and iv) Implementation Phase in which subsequent amendments might be considered. New Zealand’s budget policy statement must be tabled in Parliament not later than 31st March for forthcoming fiscal year beginning 1st April and ending on 31st March. Japan Budget Fiscal year in Japan is from 1st April to 31st March during when their annual budget remains effective. Budgetary process in Japan begins with budgetary requests of ministries to Ministry of Finance (MOF) by August end. These requisitions are subject to an upward expenditure ceiling fixed by their Cabinet. Thereafter, examinations of these proposals are done by Budget Bureau of Finance Ministry. Additional data or supporting material may be requested by this Budget Bureau from individual ministries. After this process is over by early December, MOF releases ‘budget formulation guidelines’ based on which a ‘draft budget’ is prepared. This ‘draft budget’ after being finalized by MOF is sent to various ministries and agencies before getting it authorized by cabinet. Cabinet approves this ‘draft budget’ by end December. In final stages, this ‘draft budget’ is presented to ‘Diet’ towards second half of January. After being deliberated upon by Budget Committee of House of Representatives this ‘draft budget’ is put to voting. Subsequently it is sent to House of Councilors where a similar procedure is followed. After being passed by House of Councilors, this ‘budget’ becomes effective from 1st April. India Budget Budget in India for fiscal year 1st April to 31st March is presented by Finance Minister to Parliament on 28th February or 29th February in case of a leap year. Preparation of Indian budget is an exhaustive process which involves preparation of ‘annual financial statements’, ‘demand for grants’, ‘appropriation bill’, ‘finance bill’, ‘memorandum explaining provisions in finance bill’, ‘macro-economic framework for relevant financial year’, ‘fiscal policy statement for concerned financial year’, ‘medium term fiscal policy statement’, ‘expenditure budget volumes’, ‘receipts budget’, and ‘highlights of budget’. Budget bill is passed in both Houses of Parliament, that is Lok Sabha and Rajya Sabha before being finally presented. Brazil Budget Brazilian federal budget is presented by their President to National Congress of Brazil in September for fiscal period 1st January to 31st December.
Pages to are hidden for
"Budget"Please download to view full document