A budget is “a series of goals with price tags attached.”
The word budget is derived from a French word, Bougette, meaning a leather bag or wallet. The term was used for the first time in 1733 in a satire entitled, “Open the Budget,” pointed against Walpole’s financial plan for that year. The Chancellor of the Exchequer used to carry a leather bag containing papers on the financial plans for the country to the House of Commons. So when he set off to place his financial plans before the House, he used to open his budget, i. e. the bag. It is because of this association of the financial plan with bougette that the financial statement of a country has come to be known as budget. The term budget in modern times, therefore, denotes that document which contains estimates of revenue and expenditure of a country, usually for a fixed period of one year.
Some of the popular definitions of budget are the following:
According to Dimock,
“A budget is a financial plan summarising the financial experience of the past stating a current plan and projecting it over a specified period of time in future.”
“Budget is a plan of financing for the incoming fiscal year. This involves an itemised estimate of all revenues on the one hand and all expenditures on the other.”
Elements of budget
- It is a statement of expected revenue and proposed expenditure.
- It requires some authority to sanction it.
- It is for a limited period, generally it is annual.
- It also sets forth the procedure and manner in which the collection of revenue and the administration of expenditures is to be executed.
The budget is the nucleus around which the financial activities of the State oscillate. It is both the scale and the limit of all the financial operations.
However, the meaning of budget is no longer confined to a mere statement of the estimated revenue and expenditure. With the gradual development of financial management, it has also come to include the entire condition of material finances, as disclosed in the ministerial statement placed before the legislature and the orderly administration of the financial affairs of the government.
According to Willoughby, budget “is, or should be, at once a report, an estimate and a proposal. It is, or should be, a document through which the Chief Executive comes before the fund-raising and fund-granting authority and makes full report, regarding the manner in which he or his subordinates have administered affairs during the last completed year, in which he exhibits the present condition of the public treasury, and on the basis of such information, sets forth his program of work for the year to come and the manner in which he proposes that such work shall be financed.”
To sum up, the budget is a plan of action. Today, budgets are choices, policies and philosophies, and the ways in which budgets are made reflect the choices, policies and philosophies of governments. The budget remains the life blood of the government.