ANNUAL BUDGET Meaning and
Definition
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An annual budget, also known as a yearly budget, is a financial plan containing estimated revenue and anticipated expenses for a specific time period of 12 months. It is created and implemented by individuals, households, businesses, organizations, and governments to carefully manage their income and expenditure throughout the year. The main purpose of an annual budget is to forecast and allocate financial resources efficiently, ensuring that expenditures do not exceed available income.
The process of creating an annual budget involves estimating the expected inflow of funds, which may include salary or revenue from various sources, such as investments, loans or grants. Simultaneously, potential outflow of funds is also projected, considering expenses related to living costs, rent, mortgage, bills, taxes, debts, education, healthcare, travel, entertainment, savings, etc. Once these estimates are determined, individuals or entities can plan their spending and savings accordingly.
An annual budget helps in providing a clear overview of financial status, thereby enabling better decision-making regarding allocation of resources. It assists in setting financial goals, identifying areas where expenses can be reduced or eliminated, and determining the feasibility of new investments or projects. Moreover, an annual budget facilitates tracking the actual income and expenses against the estimated amounts, allowing for adjustments, if necessary. It serves as a financial roadmap, providing guidance and discipline in managing finances effectively over the course of a year.
Common Misspellings for ANNUAL BUDGET
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Etymology of ANNUAL BUDGET
The word "annual" originated from the Latin word "annus", which means "year". It entered the English language around the early 14th century. "Budget" has a more complex etymology. It came from the Middle English word "bowgette", which referred to a small bag or pouch. The root of "bowgette" can be traced back to the Latin "bulga", meaning "leather bag" or "purse". Over time, the term "budget" evolved and began to be used for financial planning and allocation. When combined, "annual budget" simply refers to the financial plan or estimate for a year.
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