Loading the player...

What is an 'Annual Budget'

A simple annual budget lays out projected income and expenses for a 12-month period, but in many instances, particularly for non-individuals, it is expanded to include a balance sheet and cash flow statement. Annual budgets are used by individuals, corporations, governments, and other types of organizations that need to keep track of financial activity.

BREAKING DOWN 'Annual Budget'

Annual budgets can apply to either a fiscal or calendar year. These budgets help their creators to plan for the upcoming year and make the necessary adjustments to meet their financial goals. Annual budgets help individuals to better manage their money. For corporations, governments, and other organizations, annual budgets are critical and often mandated for planning purposes with respect to sources of income and necessary expenses; assets, liabilities, and equity required to support operations over the one-year period; and cash flows used for reinvestments, debt management, or discretionary purposes.  

Another prime role of an annual budget, typically broken down into monthly periods, is the enabling of budget versus "actual" performance comparisons. For example, if an individual has to dip into a savings reserve at the end of a month to pay a credit card bill, he or she can look at the annual budget items to find out where an actual expense exceeded a budgeted expense and make appropriate adjustments. For a sole proprietor to a large corporation alike, an internal annual budget is vital in keeping track of moving parts of a business to reach or surpass key financial objectives.

RELATED TERMS
  1. Federal Budget

    The federal budget is an itemized plan for the annual public ...
  2. Budget Manual

    A budget manual is a set of instructions used by large organizations ...
  3. Administrative Budget

    A administrative budget focuses on the costs of running an operation ...
  4. Static Budget

    A static budget is a type of budget that incorporates anticipated ...
  5. Zero-Based Budgeting - ZBB

    Zero-based budgeting (ZBB) is a method of budgeting in which ...
  6. Advertising Budget

    An advertising budget is estimate of a company's promotional ...
Related Articles
  1. Personal Finance

    Why It’s Essential to Create a Budget for Yourself

    Budgeting may sound elementary, but it is the cornerstone of sound fiscal management.
  2. Personal Finance

    5 Things to Know About the "B" Word

    Use a budget to create a financial selfie and stay on track.
  3. Personal Finance

    5 Steps Toward Creating an Effective Budget

    Creating a budget can seem daunting, but it doesn't have to be. Use these five steps to create an effective budget you can live with.
  4. Personal Finance

    5 Budgeting Steps for Young Families

    Here are five steps young families can take to create and stick to a budget.
  5. Trading

    Top 5 Budgeting Questions Answered

    You don't need a degree to understand your money, begin saving and pay down debt.
RELATED FAQS
  1. How do budgeting and financial forecasting differ?

    Budgeting helps management members set expectations for where they want their company to go and financial forecasting measures ... Read Answer >>
  2. How can you use a cash flow statement to make a budget?

    To use the cash flow statement to make a budget, a company needs to combine the operating cash flow portion with its cash ... Read Answer >>
  3. What are the revenue recognition criteria in accrual accounting?

    Discover some of the advantages and disadvantages of zero-based budgeting. Zero-based budgeting starts with a new budget ... Read Answer >>
  4. Which countries run the largest budget deficits?

    Discover the countries with the largest budget deficits and what it means. Deficits are influenced by the economy and also ... Read Answer >>
  5. How should a company budget for capital expenditures?

    Learn the difference between capital expenditures and operational expenses, and discover the importance of budgeting for ... Read Answer >>
Trading Center