A budget is a financial document used to project future income and expenses. It signifies a fiscal plan that lists all the revenue earned by a government in a financial year and the money spent by the same in that period itself.
This plan allows a government to save and spend as per their requirements and also borrow if the need arises.
Purpose of Budget:
The basic purpose behind a budget may be enumerated as below:
Giving an estimation of expenses and revenues.
Provide a platform for measuring the economic performance of a government with regards to forecast.
Creating a model that highlights how a government can perform properly if a few strategies and plans are executed.
The Budgeting Process:
The budgeting process may be carried out by individuals or by companies to estimate whether the person/company can continue to operate with its projected income and expenses.
The process for preparing a budget includes:
Listing of all sources of income.
Listing of all required, fixed expenses, like rent/mortgage, utilities, phone, etc.
Listing of other possible and variable expenses.
A government budget is framed by members of the legislature and more often than not, endorsed by the President or the chief ministers, in case it is a provincial budget.
The government budget deals with several types of taxes but not every organization within the government is responsible for all the taxes. Counties and municipal bodies deal with the property tax, while the provincial governments are responsible for collecting the sales tax and at times, the income tax, which are normally under the jurisdiction of the central government. The national governments also deal with the corporate tax.
Revenues and expenditures are the basic components of a budget. Governments earn their revenue primarily through the taxes. The major areas of expenditure are termed public consumption and expenditure by economists. Major examples of such expenses are research and infrastructural development.
Central governments also deal with transfer payments such as retirement and unemployment benefits. Experts opine that government budgets are not always concerned about allotting the best resources in areas with high levels of necessity. It often gets influenced by political considerations also.
Policy makers are concerned about several benefits and try to avoid placing too much burden on the economic structures.
- United States Budget:
The Office of Management and Budget prepares the US budget and presents it to the Congress, which considers its various aspects before finally approving it. The Congress normally makes many changes of varying degree of significance to the proposed budget. Almost every state in USA is supposed to have a balanced budget but the national government is permitted to operate with deficits.
- United Kingdom Budget:
The Treasury prepares the annual budget in United Kingdom and is guided by the Chancellor of the Exchequer. The UK Parliament normally does not make any major change to it.
- India Budget:
Every year the Budget Division of the Department of Economic Affairs, Ministry of Finance, prepares the Union budget of India, which also includes supplementary additional grants. The Union Railway Ministry presents its separate budget.
- Canadian Federal Budgets:
The Government of Canada is responsible for the annual federal budgets. The budget identifies and plans critical areas of public spending and estimates revenues. It also provides economic predictions for the next year.