I. Read and translate the text.

A budget is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending.

A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms.

In summary, the purpose of budgeting is to:

1. Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out.

2. Enable the actual financial operation of the business to be measured against the forecast.

Budget helps to aid the planning of actual operations by forcing managers to consider how the conditions might change and what steps should be taken now and by encouraging managers to consider problems before they arise. It also helps co-ordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments. Other essentials of budget include:

To control resources
To communicate plans to various responsibility center managers.
To motivate managers to strive to achieve budget goals.
To evaluate the performance of managers

Budget types:

Sales budget – an estimate of future sales, often broken down into both units and dollars. It is used to create company sales goals.
Production budget – an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Created by product oriented companies.
Cash flow/cash budget – a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing.
Marketing budget – an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.
Project budget – a prediction of the costs associated with a particular company project. These costs include labor, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each.
Revenue budget – consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies.
Expenditure budget – includes spending data items.

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