Friday, 11 July 2014

Budget Basics

Budget is and instrument through which the government controls the entire economy where as budgeting is a process of preparing, negotiating and agreeing a quantified and specific plan for organization, normally for a year.

There for budget is a mirror to look the government developmental activities which sets a framework for policy formulation and implementation. This is also a means of legal control. Budget document is the good source of public information on past activities, present decisions and future on past activities, present decisions and future prospects. A significant feature of a budget is comprehensiveness that must include all government agencies and financial transaction...
Two component of Budget:
     1) Government Expenditure
     2) Government Revenue
Government expenditure can be classified in following ways:
     1)  Object Classification
     2)  Functional Classification; includes General public service and economic classification for example: Current Expenditure, Capital Expenditure, Net bending including net acquisition of equities  ; and Economic service includes Agriculture, Mining, Manufacturing, Electricity, Roads, Water transport.            
     3)Economic Classification:

Budget Cycle

Types of Budget
  • Deficit Budget:
  • Surplus Budget
  • Balance Budget
  • Program Budget
  • Line item Budge
  • Zero Based Budget
Program Budget:
Budget which is prepared keeping program as base is called program budget. In this type of budget there is per unit cost is determined. This budget has been started by Hoover Commission in America in 1945 AD. In Nepal this budget came in to existence for development expenses. In 1950 AD second Hoover Commission brought the concept of program budget which tells that planning and program is the part of budget system.
The main objective of this budget is to achieve the goal and result by making budget program oriented. This budget was implemented in FY 2007/28. There are three element of program budget
  • Planning (Structure)
  • Program (Analysis)
  •  Budgeting (Information arrangement)
Deficit Budget:
When Expenditure exceeds the Income deficit occurs. The budget in which is presented to meet the deficit is regarded as deficit budget. Developing country used to prepare this kind of budget in order to utilize neutral resource and means of the country. This budget is largely being practiced in Nepal.
Surplus Budget:
On the contrary to deficit budget when income exceeds the expenditure. This kind of budget is generally practiced in developed country. This budget was implemented in FY 2033/34 BS in Nepal.
Balanced Budget:
This kind of budget is practiced when Income equals to expenditure (Income = Expenditure). Balanced Budget was practiced in 2009/10BS in Nepal.
Zero Based Budget:
The concept of ZBB was developed by US former president Jimmi Carter in 1977AD. The budget which is prepared without considering previous year budget as base is called as zero based budget.
Line Item Budget:
The Budget which is prepared (allotted) on the basis of individual expenditure is regarded as line item Budget. This budget also called as expense head budget. The allocated budget in Nepal for example, Salary, Allowance, Travelling allowance, furniture etc..
Historical Back Ground of Budget:
Fiscal Year (AD/BS)
1733 AD
UK first country to implement budget by UK PM Robert Walpole
2008-10-22 BS
First time implemented in Nepal by PM Matrika Pd. Koirala and Finance Minister Subham Samsher.
2009/10 BS
Balanced Budget
Implementation of FY from 1st srawan to Ashad
2013/14 BS
Budget was divided into General and Development Budget.
2016/17 BS
Budget presented in Nepalese currency
2017/18 BS
Issuance of Act on National Debt
2026/27 BS
Development Budget/Program Budget
2033/34 BS
Surplus Budget
2059/60 BS
Implementation of MTEF(mid term expenditure program frame work)
2061/62 BS
Implementation of budget by dividing into Current Budget, capital Budget and principal return instead of General and Development budget
  •     The country who presents two different Budgets is India; Rail Budget and Union Budget.
  •     France is the country which present budget twice in a year.
  •     Program Budget first started from America
   Budget 2071/72: 
    Many are worried about inflation, Many are curious to know the allotment fund for their area and community, Entrepreneurs and Traders are more concerned towards Tax horizon, Employee are more curious to know about their increment .Considering these entire situation how do you think that upcoming budget will fulfill all these expectations???

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