A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organizations, activities or events in measurable terms. Budgets are important due to several reasons.

  1. To communicate plans to various responsibility center managers.
  2. To motivate managers to strive to achieve budget goals.
  3. To evaluate the performance of managers
  4. To provide visibility into the company's performance
  5. For accountability

There are several methods that can be used to prepare budgets