Going into each year, a company (or a person, or any other organization for that matter) will outline what it expects its spending to look like over the following 12 months. This projection is the annual budget.
The budget typically gets worked out based on educated guesses about what revenue will look at for the year. It also includes assumptions about what the goals are for the upcoming 12 months, taking into account things like whether a new international expansion is planned or whether a new product launch is scheduled.
Obviously, a lot can happen during a year, so annual budgets often get revised as the year moves on. In a corporate scenario, these reviews usually happen on a quarterly basis, as the company reacts to revenue realities and tries to take advantage of opportunities that arise unexpectedly. So, in that way, the annual budget becomes more of a guideline, or sketch, for the year ahead and is not considered set in stone.
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Finance: What is a Budget?43 Views
Finance a la shmoop what is a budget? that's that thing you throw right out [Woman throws budget out the window]
the window just before you start doing all your Christmas shopping
right but generally it's a plan that lets you see where your money will be
spent if you have a personal budget well you'll be able to decide ahead of time [Personal budget example]
how much money you'll spend on clothes, food, megaphones to annoy and anger your
neighbors and you know whatever floats your boat if you own a company well
you'll probably have much more complicated budget for things like
advertising and lawyer fees either way the plan helps you make sure that you
have enough moolah for everything you need and maybe some leftover for stuff
you want.....Joan wants to control her money so she decides to set up a budget for [Joan setting up a budget on a laptop]
next month she makes a thousand bucks from her summer job and well here's what
her budget looks like.....
Now Joan knows exactly where every penny is gonna go she's not [Joan driving a car]
gonna be caught off guard by any surprise expenses she's not gonna spend
$200 on safecracking equipment and then realize she doesn't have enough left [Joan stood beside a vault of gold bars]
to pay her phone bill although if she does get hit with some unexpected
expenses well hopefully yeah she can just pawn some of those exotic vases she
took from the Peterson place [Joan holding a vase]
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