Expenditure Budget

By: EconomyWatch   Date: 30 June 2010

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The annual expense plan of a commercial enterprise is explicitly stated in the Expenditure Budget. The primary purpose of an Expenditure Budget is to define an economic policy, with respect to the financial spendings made for infrastructural and equipment purposes, which include their making and maintenances.

In an Expenditure Budget, capital expenses are described in terms of the construction, refurbish, lease or buying of assets like software, machineries and other facilities. However, the prices of these assets should either be $50,000 or more than that, having an anticipated utility for at least a year or so. In fact, all the possible expenses are listed and recorded in an Expenditure Budget.

As an integral part of the Expenditure Budget, the calculation of capital spending is based on the submission of facts for acceptance, from various portfolio departments to the Administration and Finance Divisions. It is the Administration and Finance Division, which suggests a capital budget scheme to the President and the Board of Trustees of the concerned company for final approval. In fact, approval of unbudgeted commercial programs and equipments worth a total expense of $50,000 or more, comes from the Capital Budget Expenditure Request or CER.

In case of Expenditure Budgets, there may arise a necessity for buying or renting equipments, even after the sales and the production budgets are compiled simultaneously. This is because there is deficit in the availability of resources which are unable to satisfy the demand at a particular point of time. This ultimately leads to an escalation of the total expenses.

Primary objectives of Expenditure Budget:

At the time of allocation and spending of money, an Expenditure Budget takes into account the following few factors:

  • The budgetary financial acquisitions are allocated in a manner to create a symmetry and bring about a parity among the collective requirements of all customers.
  • Expenditure Budgets aim to maintain a parity between the persisting commitments and fresh initiatives.
  • Expenditure Budgets balance different subject disciplines as well.
  • A symmetry is preserved by all Expenditure Budgets between all the available financial resources of a company as well as resources like research work. This ultimately earns funds for the organization.
Expenditure Budgets on government levels:

The government also prepares Expenditure Budget to calculate and record its potential spendings in detail. It involves the expenses of different ministries and departments, included in different statements, in the form of net financial receipts and recoveries.


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