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The one major aspect that troubles all individuals is budget. From the richest to the poorest, planning expenses and dealing with them is a challenging task for everyone. Be it the budget of a household or of a firm or of the nation, it is a point of concern for everyone involved in it. Thus, the topic of budget is a point of interest for everyone.
Budget in Brief
To begin with, it is important for all to understand the basic concept of budget. A budget refers a well-planned document of revenues and expenditures. This concept is the underlying feature for all the budgets. Thus, a budget of a household or of a firm or of a country has the same basic concept. When the revenue of an individual is decided he prioritizes his wants and accordingly prepares his budget. A budget is extremely important to direct, control and regulate the financial resources of the individual. It would be a good idea to focus on different budgets varying from a household budget to a national budget.
1) Household Budget: This is the most microeconomic concept with respect to budget. In a household budget, the family’s income is the total revenue and the expenses of every member of the family are the total expenditure of the household. The family plans its expenditure according to its total revenue.
2) Budget of a Firm: The budget of a firm is planned on a yearly basis. In every corporate firm, there is an independent accounts department that prepares the budget of the company. This budget is based on the revenues and expenditures of the company in the given financial year. If the actual figures of the company are close to those mentioned in the budget, then it means that the company is moving in the right direction and that the planners are doing a good job. However, if the actual figures of the company diverge greatly then these are not good signs for the company and send out the wrong signals.
3) National Budget: The national budget refers to the income and expenditure of the government of the country. The budget involves the value of imports and exports of the country. All the revenue that is collected by the government in all the forms finds a mention in the budget. The finance ministry is required to maintain the details of the revenues and expenditures of the government for the year.
These are some of the basic concepts of budget. Preparing a budget is difficult but very necessary. It helps in the financial planning for a given period of time. Without a proper budget in places, it is likely that the finances are misused.