Budgets are normally drawn up for a year. The year is typically divided into quarters or months. In some cases, budgets are drawn up on the basis of an operating cycle, which completely traces a particular activity from the time it is started until it is completed.
The budget usually corresponds with the fiscal year so that meaningful comparisons of actual results with the budget can be made.
A budget that extends far into the future is liable to be less accurate. Also, if the budget is restricted to a quarter or a month, it tends to encourage a short-term perspective.
Hence, budgets are normally prepared for the year by quarters; with division into months as the immediate quarter approaches.
Provision is also made for reviewing and correcting the budgets frequently. This ensures that any changes that may have taken place after the preparation of the budget are taken into consideration.