The
Definition Of

Budget

A budget is a formal written statement of management’s plans for a specified future time period, expressed in financial terms. It normally represents the primary method of communicating agreed-upon objectives throughout the organization. Once adopted, a budget becomes an important basis for evaluating performance. It promotes efficiency and serves as a deterrent to waste and inefficiency.

Share it:

More from this Section

  • Time period assumption
    Time period assumption is a convenient assumption that accountants can divide the economic life of a business into artificial time periods. The time period assumption...
  • Purchase discount
    Purchase discount means a cash discount claimed by a buyer for prompt payment of a balance due. The credit terms of a purchase on account may permit the buyer to claim...
  • Participative budgeting
    Participative budgeting is a budgetary approach that starts with input from lower-level managers and works upward so that managers at all levels participate.
  • Change in accounting principle
    A change in accounting principle occurs when the principle used in the current year is different form the one used in the preceding year.
  • Other revenues and gains
    A non operating activities section of the income statement that shows revenues from auxiliary operations and gains unrelated to the company operations.
  • Factor
    A factor is a finance company or bank that buys receivables from businesses and then collects the payments directly from the customers.
  • Production cost report
    A production cost report is the key document management uses to understand the activities in a department; it shows the production quantity and cost data related to that department.