FINANCE: Meaning, types and uses of Budget

Budget

 The Budget is a financial statement made by the government which shows or identifies the estimated government revenue and the government proposed expenditure for the next financial year.


TYPES OF BUDGET

There are two basic types of the budget which are Budget Deficit and Budget Surplus.
1. Budget Deficit: Budget Deficit is said to be in occurrence, when the estimated government revenue for a given year is less than the proposed expenditure for that financial year.

USES OF BUDGET DEFICIT

The following are the uses of Budget Deficit:
i. A Budget Deficit can be used to reduce unemployment through the process of increasing the aggregate expenditure (demand).
ii. Budget Deficit can be used to finance and thereby reducing the effect of national emergency such as earthquake, war, famine, etc.
iii. Budget Deficit can also be used to finance projects and government works that require a huge capital layout.
iv. Budget Deficit can be used as a remedy for inflation by increasing the aggregate expenditure and demand.
2. Budget Surplus: When the proposed government expenditure for a given year is less than the estimated government revenue for that financial year, then there is said to be a Budget surplus.

USES OF BUDGET SURPLUS

i. Budget Surplus can be used to reduce inflation pressure on the economy by reducing the aggregate spending (demand).
ii. Budget Surplus is sometimes used in order to meet one of the conditions of world financial institutions for lending money to enable the borrowing country to revitalize its economy.
The Budget is said to be Balance if the proposed government expenditure for a given financial year is equal to its expected revenue.

PRESENTATION OF GOVERNMENT BUDGET

1. Object Presentation Of Expenditure, also known as Object Budgeting:- In this type of budgeting, the government presents its expenditure for a given financial year according to the objects or items money is going to be spent on. These items could include things such as social infrastructures, salaries, transport charges, office equipment, subsidies, etc.
2. Functional Presentation Of Expenditure Or Functional Budgeting:- In this type of budget presentation, the purpose of the total government expenditure is been shown. Functional Presentation of Expenditure enables one to know the amount spent on the various sector of the economy such as education, health, agriculture, etc.



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