 It is a financial plan for expected revenue and expenditure for an organization or a department within an organization, for a given period of time.  Budgets can also be stated in terms of financial targets such as planned sales revenues, costs, cash flows or profits

 Sales budgets: The focus is on forecasting how many products a business aims to sell over the next year and the likely revenue to be received from the sales  Staffing budget: This plan translates the mnetary costs of staff that are required for the organization for the next twelve months  Production budget: This is the plan for the level of output over the next year  Marketing budget: This refers to the forecast of how business inteds to achieve its bidgeted sales through marketing activities

 Available finance:  Historical data: what was happened in the past  Organizational objectives: if a business is planning external growth, then budgets will need to be raises  Benchmarking: This mean setting a firm’s budget based on the budgets of its competitors

 As with all forms of Quantitative forecast, there are likely to be unforeseen changes that can cause large differences between the budgeted figure and the actual outcome.

 The difference between the budgeted figure and the actual outcome, this is known as the variance  Favourable variances: It exists when the discrepancy is financially beneficialto the organization. Ex: The actual marketing costs were valued at $220,000 but the budgeted value was $250,000, so the firm has a favorable variance of $30,000

 Unfavourable variances: It is also known as an adverse variance. It occurs when actual costs are higher that expected.

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