Budget is a blueprint for the future course of action and activities. It means expressing the future course of action of an organization in quantitative terms. It is an estimation of revenue and expenses over a specified future period of time; it is compiled and re-evaluated on a periodic basis.

Longman’s Dictionary of Business English defines a budget as “an account of the probable future income and expenditure.”

According to the Institute of Cost and Management Accountants, London, Budget is “a financial and/or quantitative statement, prepared and approved prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective.”


Budget has the following important characteristics

  1. It is prepared in advance and relates to a future period.
  2. It is expressed in terms of money and/or physical units.
  3. It is a mean to achieve the planned objective.

In business, the different kinds of budgets are prepared to facilitate different aspects of the business concern. Such aspects relate to sales, purchases, production, overheads, as well as financing of the business. One of the main budgets prepared by a business concern is Cash Budget.