Page 38 - Budgeting for Managers

The Parts of a Budget
Although budgeting for
days and weeks can be
budget up to one year long.
useful in a household, in
Long-term budget Any
business we work mostly
budget over a year long.
with months and years. So Short-term budget Any 21
Accounting year A one-year peri-
we’ll start there. od starting in a particular month, not
Budgets for a year or necessarily January, used for business
less are usually called accounting.
short-term budgets, and
those for over a year are long term. One good reason for think-
ing in terms of a year is that many things tend to repeat on an
annual cycle. Another is that companies file tax forms annually,
so it’s good to keep track of what we are doing according to
accounting years.
The Accounting Year for a Seasonal Business
A business with most of its sales during the Christmas sea-
son probably won’t want to end its accounting year in
December.That would require too much accounting work when sales
are heavy. It also would break up the big season (which includes after-
Christmas and New Year’s sales) into two years.The company might
choose an accounting year that begins on April 1 and ends on March
31, after winter sales are over. Corporate taxes are due two and a half
months after the end of the business year. So, if the year ends March
31, the corporate taxes are due May 15.

A short-term budget has two purposes: planning and con-
trol. We plan for what money we’ll receive and how we’ll spend
or save the money we get. We also want to be able to control
the money we receive and
spend. We control money Tracking Comparing actu-
by tracking actual results al results against the esti-
against estimates and tak- mates we made in our
ing action to resolve any budget and noting the differences.
important discrepancies. Control Taking corrective action
Long-term budgets are based on tracking, changing the way
only for planning; they are we work to get the results we want.