Budget Definition
A budget is an estimate of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis.
Budgets are often used in organizations to track actual results against desired outcomes and to make decisions about where to allocate resources. For individuals, budgets can be used to track actual spending against goals and help curb overspending.
There are many different types of budgets, but all aim to track income and expenditures in order to make informed financial decisions. Some common types of budgets include:
Zero-based budgeting: A type of budgeting in which all expenses must be justified for each new period.
Activity-based budgeting: A type of budgeting that focuses on activities rather than products or services.
Incremental budgeting: A type of budgeting that starts with the previous period’s actual results and then adds or subtracts an amount based on expected changes in the current period.
Line item budget: A type of budget that lists all anticipated income and expenses by line item, such as rent, utilities, advertising, etc.
