What is a budget?
A budget is the rough calculation of the income and expenses for a certain period of time, like a year. Budgets can be calculated for an individual, family, organization or a company.
There are three main terms to categorize budgets: surplus budget, the balanced budget, and deficit budget. Surplus budget means that the revenue is much greater than the expenses; balanced budget means that the expenses are equal to the revenue, and deficit budget is when the expenses are higher than the revenue.
Budgets are prepared periodically and changes are made according to the analysis of the budget during that period. While in most cases acquiring surplus budget is the aim of organizations, in some cases the companies are happy to work in deficit budgets.
What is budget analysis?
Those who perform the analysis are known as budget analysts. A budget analyst gathers up all the details about the organization or company for which the analysis is being made. The data which they collect consist of all the expenses and revenues of the company, like when, where and on what the expenditures were made.
Their main work revolves around making a cost-benefit analysis of all the projects throughout the specified period of time and determining through which ventures the company has acquired the most profit and which project has yielded them the least profit or loss, if any. The analysts also look into the matters and device plans and ways to improve their trades.
Through budget analysis, the company or organization gets to know if a non-profit yielding project should be canceled. The analysts use accounting and budgeting software and present their ideas to the decision-maker through a detailed analysis report. The decision-makers go through the analysis and made the necessary changes and improvements.
What is it used for?
The main purpose of a budget analysis is to ensure that theoperations of the company, organization or family are in profit and working efficiently. It helps them fill up the lacunas in their trades, improve the imperfections and look into their capabilities of any future investments, like financial capabilities to fund projects, which they have planned for. Budget analysis is essential for the organizations to work efficiently and regular analysis helps them to stay up-to-date with the profit-loss analysis.
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