Budgets are normally drawn up for a year, with the year being divided into quarters or months. In some cases, budgets are drawn up on the basis of an operating cycle — complete tracing of activity from the time it is started until it is ended. 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. Also, provision is made for reviewing and correcting the budgets frequently to incorporate the changes which may have taken place after the preparation of the Budget.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.