Budgeting is the activity of creating a plan on how to spend the available money, budgeting allows an entity to determine well in advance whether there is enough money to cover all the activities. There are numerous benefits to budgeting; one benefit is that budgeting enables an entity to have control over money. Another benefit to budgeting is that it keeps an individual focused on financial goals, budgeting also allows one to save for investment.
Fiscal year is a term that describes the accounting period for an organization, the designation of the fiscal year is by the calendar year in which it ends. The operating budget is the combination of expected future costs, known expenses, and forecasted income over the period of one year (Lasher, 2013). A capital budget is a plan for raising long-term sums for investing in expensive infrastructure (Lasher, 2013).
A budget cycle involves the steps involved in preparing the budget (Lasher, 2013). The first step in the budget cycle is generating the budget; the organization outlines its needs and includes them in the budget document. The second step in the budget cycle is approving the budget this is followed by executing and evaluating the budget.
Lasher. (2013). Practical financial management. Nelson Education.