A budget is one of the most common and most-used financial documents. A budget is basically a projection of the income and expenses. This document is the result of a process, aptly called the budgeting process, which takes into account potential earnings and expenses. The budget then shows what is likely to happen within the period (usually annually) covered by the process.
For companies, a budget has a twofold goal. One is to provide a look into the future with regard to revenues and expenditures. In other words, the individuals who work on the budget try to forecast what might happen to the company, taking into account various factors such as strategies and plans as well as other events.
The other goal is to be able to compare the actual performance of the company with the forecast. This will also provide financial analysts with more data that can be used to improve the company’s performance in the future.
There are many different kinds of budgets. For example, the budget for a start-up business is going to be different from the budget for a company that has been up and running for several years. Governments around the world also have their own budgets. Even individuals can create their own budgets in order to become more efficient in handling their personal finances. Another example of a budget is the document created for special projects.
