A budget is a plan that estimates current and future expenses and revenues. A budget’s purpose is to create a projection of spending, savings, and money allocation. In a business, monetary amounts are allocated to various business objectives and strategies to achieve goals.

Budgets are prepared prior to the start of the fiscal year and released on the first day of the fiscal year. These are the financial plans that a company intends to follow. However, they frequently require adjustments based on the requirements. Budgets of various types include:

  • Static budget: A static budget does not change even when business activities such as sales, expenses, and revenues change.
  • Flexible budgets are those that change in response to business activities.
  • Rolling budget: The budget is continuously extended by removing one month after completion and adding one month after the end date. For example, the fiscal year runs from June 1st, 2016, to May 31st, 2017. After June, the accounting period is extended until June 1st, 2017.
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