What is significance of budget?

Answer 1

For Government

In case of an annual budget of a nation, budgeting is all about making a blueprint of the overall funds that the concerned government will spend on various sectors, the kinds of taxes that would be levied and how the prices of essential commodities would increase or decrease in the months ahead. Like any other budget, a government budget too relies on revenues and expenses. While the revenues are generated from the various taxes imposed, expenses usually include the expenditure amount on goods and services, consumption, investments, retirement benefits, and so on. In the absence of a good budget, the government officials will have to struggle hard in developing processes for the same.

For Family

The safety and security is the foremost concern for a family. Hence, planning a personal family budget is highly significant. Budgeting in a family is simply done by streamlining the expenses of every family member in accordance to the overall funds collected by the earning members of the family. While some people believe the budget to be a complicated matter of numbers and accounting practices, others assume planning the budget to prevent them from unforeseen problems, downfalls and financial losses. The major issue that comes forward with planning a family budget is that it limits the control of a person over his/her money. However, the fact is that budget does not restrict anyone. It, instead, only guides people towards the allocation of money in different sectors, such as food, shelter, clothing, household expenses, medical care, utilities, etc. on a monthly basis.

For Business Organizations

Business organizations have a strong reason for planning a budget. It helps them in planning targets for the future, in terms of laying figures that the organization plans to achieve. It is of no use to plan a budget with a host of high figures that is practically unachievable. Similarly, a budget that is too easy to achieve is also pointless as the business would then not be making enough progress that it should. Hence, a good budget is one that is achievable in reality with the motive of striving for the highest profits. While most budgets are planned annually, some can be set for a prolonged period as well. To put the budget into action, it should be prepared well in advance before the commencement of the financial year.