Budget is a financial statement that coins down the expected revenue and expenditure of a particular fiscal year. There are different types of Budget that may be discussed in the following section:
Partial Budget: Partial Budget aims to make small changes in the financial condition of a corporation. The process of Partial Budgeting involves a comparison between the plus and minus effects occurring due to the implementation of the proposed changes on the net income.
Partial Budgets are in fact helpful while evaluating changes like:
Improving the capital condition
Expansion in the size of a company
Searching for alternative companies, where changes need to be introduced
Employment of a custom operation, and not a purchasing instrument
Variations in the methods of productions
Business Set Up Budget: A Business Set Up Budget deals with the financial expenses required during the establishment of a commercial firm or enterprise. The expenses in this case include the costing of the basic infrastructures. It is considered as one of the fundamental means of introducing, improving and maintaining a business house. Hence, it explicitly studies the inflow of cash in the form of income, and plans the expenses of the concerned organization, based on the available funds in hand. Since a Business Set Up Budget is only based on assessments of the expected income and expenditures, the predictions and calculations are subject to variations. Hence arises the requirement of reviewing the budgetary documents from time to time, to adjust the estimated facts and figures with the actual ones.
Government Budgets: are the summarized versions of the anticipated revenues and expenses of a government. Formulated by the executive and passed by the legislature as a legal document, Government Budgets focus on the distribution of wealth for economic as well as political and social purposes. Some areas covered by the budget include:
Exemption from personal income tax
Estimating the status of the national exchequer, both during the last and coming fiscal years
Enhancing sectoral productivities
Corporate Budgets: formulate the annual fiscal agendas, plans and programs of a commercial organization. It works for putting forward the expected income and expenditure figures of a company, for the next financial year.
In Nigeria, as well as around the world, a majority of taxpayers view tax not as a contractual contribution to government expense, but as an involuntary tribute to be paid to avoid prosecution and penalty. Merely transcribing taxes from economic textbooks into local law will not work; tax regimes have to be developed from within the society, and targeted at the peculiar needs of the government. Tax policies have to be written by the people – and for the people. Only then would a sense of participation and expectation be truly generated, and the tax system manifestly effective.
Eric J. Gleacher Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago. IMF’s Chief Economist from September 2003 to January 2007. Inaugural recipient of the Fischer Black Prize.