Budget year

accounting

A budget year is a period of time contemplated in the budget of an entity. This covers the deadlines in which it proposes to meet its objectives.

In general, all public and private organizations that propose a budget to govern their activity, do so based on a budget exercise. Throughout this period of time, companies establish a predictable schedule of income and expenses. Usually, this refers to the calendar year, so we say the year 1995, the year 2020, as well as the year 2067, depending on the year to which we refer.

In other words, the exercise proposes an order and a periodicity of the budgetary inputs and outputs that the company expects to experience over a period of time. They configure their economic activity and are calculated in advance for greater order and compliance with the legislation.

On the other hand, companies usually seek consistency when establishing their different forecasts. For this reason, it is common for the budget year to coincide with other forecasts such as the calendar of the fiscal year and the accounting year.

Another common name for this concept is a budget period. It defines the objectives of a company and the resources with which it intends to meet them, given specific deadlines.

Highlights of a budget year

As we said, the most common is that a budget year is made to coincide with the calendar year. This is frequent in organizations that develop a continuous activity and in the long term.

In this sense, the repetition of budget preparation facilitates the work of its fulfillment, due to the experience that is generated.

However, it is also possible to carry out budgets that have more limited budget years.

This occurs in short-term projects or projects of limited duration starting at a certain number of months, for example. This is the case in construction or software development projects.

Budget year vs. budget cycle

In the field of Public Administration, it is common to see the concept of the budget cycle. It is configured by different stages of configuring a budget.

One of the basic conditions to be developed is the period of time covered by said economic plan. That is, to locate in which budget year your proposed activity takes place.

In most cases, the comparison established between data belonging to different budget years helps to understand the operation of an entity.

This is observed when establishing differences between budget items of different years. For example, a bakery can observe the evolution of the cost of its raw materials over time and thus more efficiently estimate the forecast for the following year.

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