Define Budget.

A budget is a financial plan that outlines estimated revenues and expenditures over a specific period, typically a fiscal year. It serves as a comprehensive framework for allocating resources and managing finances efficiently to achieve organizational goals or meet specific objectives. The primary purposes of a budget include:

1. Planning and Forecasting: A budget helps organizations anticipate income and expenses, enabling proactive decision-making and strategic planning. It assists in setting financial targets and allocating resources effectively.

2. Control and Monitoring: By comparing actual financial performance against budgeted figures, organizations can monitor variances, identify discrepancies, and take corrective actions to ensure financial stability and adherence to financial goals.

3. Resource Allocation: A budget allocates resources among competing priorities, departments, or projects based on strategic priorities and financial constraints. It helps optimize resource utilization and prioritize spending based on predefined objectives.

4. Performance Evaluation: Budgets facilitate performance evaluation by providing benchmarks for measuring success and efficiency. They enable organizations to assess the impact of financial decisions and track progress toward financial and operational objectives.

5. Communication and Transparency: Budgets communicate financial plans and priorities to stakeholders, including management, investors, employees, and external parties. They enhance transparency by disclosing financial intentions and commitments.

Overall, a well-designed budget is a critical tool for financial management, enabling organizations to plan, control, allocate resources, evaluate performance, and communicate financial priorities effectively. It serves as a roadmap for financial decision-making and supports the achievement of organizational objectives in a structured and accountable manner.