In “A Dictionary for Accountants”, Kohler defines budget as:
- Any financial plan serving as an estimate of and a control over future operations.
- Hence, any estimate of future costs.
- Any systematic plan for the utilization of manpower, material or other resources.
The Chartered Institute of Management Accountants, London, (terminology) defines a budget as
“A plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure and the capital to be employed. May be drawn up showing incremental effects on former budgeted or actual figures, or be compiled by zero-based budgeting.”
A budget is a precise statement of the financial and quantitative implications of the course of action that management has decided to follow in the immediate next period of time (usually a year).
Thus the essential features of a budget are as follows:
- It is a statement expressed in monetary and/or physical units prepared for the implementation of policy formulated by the management.
- It is laid down prior to the budget period during which it is followed.
- It is prepared for the definite future period.
- The policy to be followed to attain the given objective must be laid before the budget is prepared.
