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.

Frequently Asked Questions

What is the difference between "quarter" and "month"?

A quarter refers to a period of three months, while a month is one of the twelve divisions of the calendar year.

What are some examples of budget periods?

There are many different examples of budget periods. Some common examples include a fiscal year, which generally runs from January 1 to December 31 for most organizations, and a quarter or month period that is usually three months long.

What does "by quarters" mean?

This means that the budget will be broken down into quarters, or 4 parts.

What does a budget period mean?

A budget is created for a specific time period. The amount of money that an entity plans to spend during that timeframe, through revenues or other means like loans, gives the organization some idea of what they need to accomplish over the course of the year.

What does budget period mean in accounting?

A budget period is normally drawn up for a year; it can also be quarterly or monthly; however, the most common is annually. It may not necessarily correspond to the fiscal year.

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