Difference Between Families Budget And Business Budget
Budget, Family. The family budget is a plan for use of expected income and other resources for spending, saving, and sharing. The budget for the next period (for example, a month or a year) is part of a family’s long-term financial plan for supporting itself through the life cycle, educating the children, and contributing to social welfare.
A plan that is written in some detail is particularly useful for new families, those making large changes in their plan, and those with complicated plans involving many persons. A budget is a plan for a future period; an expenditure record is a history of past uses of money.
Why Families Budget
The family prepares a budget to obtain maximum satisfactions from use of income by providing first for the most important expenditures. A budget also serves to balance outgo with income and to develop family cooperation on money matters.
Families budget their incomes to provide for daily necessities, costs of emergencies, periods of reduced income, and daily comforts and luxuries. They also budget for large pleasurable expenditures such as vacations, for advanced schooling, for support of the heads of the household in their old age, and for sharing with others outside the household. Repayment of debts or accumulation of assets may also be goals.
Without careful budgeting, a family can dissipate a good income so that there is not money for larger items of furnishings, a down payment on a home, special schooling for the children, or the needs of the parents in their old age.
Budget, Business.A business unit employs a budget to carry out its financial planning or forecasting. A business budget is a formalized quantitative presentation—that is, a set of figures—of a firm’s coordinated plans.
A well-prepared budget forces planning at all levels, improves coordination of all activities of the firm, increases employee motivation, reduces costs by increasing efficiency, and enhances management’s ability to make the wisest choice of alternative courses of action.
Objective of a Business Budget
The primary purposes of business budgets are to improve planning and control and ultimately to increase the profit and improve the financial position of the firm. A person who is required to prepare a formalized plan that may be subject to review by others, and who will be held responsible for compliance with the plan, will prepare carefully for the future. Thus, operating on a budget should be much more efficient than operating on a day-to-day basis. A good budget program forces management to focus attention on particular operating and financial problems far enough in advance to plan effectively for them.