Business, Legal & Accounting Glossary
A balanced budget is one where expenditures equate income. In other words, a balanced budget is a budget where total revenues are equal to or greater than total expenses. A budget may be considered balanced after a whole year’s expenses and revenues have been obtained and registered. Budget for a coming year may also be considered as balanced according to estimates beforehand.
The term ‘balanced budget’ commonly refers to the official budgets of governments. It is to be noted that a balanced budget means a financial situation where revenues may equal or exceed expenses. The budget is not considered balanced if expenses are more than revenues.
A balanced budget is a budget in which income equals expenditures. In other words, if a country takes in X dollars in a year and spends exactly that amount, it has a balanced budget. The term ‘balanced budget’ usually applies to the U.S. federal government. For most of the past forty years, the United States has not maintained a balanced budget but rather ran a deficit. The exception to this occurred during the tail end of the dot-com boom during which the U.S. federal government not only maintained a balanced budget but ran a surplus. Classical economists tend to argue that a balanced budget should be the aim of the government.
Keynesians argue, however, that the government should forgo the goal of a balanced budget during difficult economic times and instead attempt to stimulate the economy through deficit spending.
It refers to an economic action wherewith the simultaneous increase or decrease in government revenues and expenditure, the national income will vary by the same amount. The balanced budget multiplier equals to 1. Such a change in national income is inverse to equal change in expenditures and revenues of the government. The balanced budget is vital for understanding how country governments manage their respective economies.
It is a budgeting technique where all expenses must be rationalized for each new period. Zero-based budgets are initiated from a ‘zero base’ and all functions within a suitable entity are studied for its needs and costs. Zero budgets are then constructed around essentials for the approaching period. It does not depend on previous budgeting history to make key decisions.
It is an estimation of the inflow and outflow of cash for an individual or business for a particular period of time. This budget is employed to evaluate whether the commercial entity has enough cash to carry out standard operations and also to determine if cash is being utilized in non-productive business tasks.
Cash budgets are frequently used by smaller commercial firms. The technique helps it to determine the maximum credit it can extend to its clients before the company begin to suffer problems in liquidity.
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This glossary post was last updated: 29th March, 2020 | 14 Views.