Question

• Prompt: (1) Explain governmental budget, its primary purpose, and its three distinct components. (2) Explain step-by-step the governmental budget cycle process.

Answer 1

Governmental budget is a document or statement prepared by government or by legislature and presents the Expected revenue from tax and spending or expenditure of govt for the next financial year which requires sanction. Budgets are also known as Annual Financial Statements. There may be

Balanced Budget- ExpectedExpenditure=Anticipated Revenue

Surplus Budgets= ExpectedExpenditure<Anticipated Revenue

and Deficit budgets.-Expected Expenditure>Anticipated Revenue

Purpose of budget.

Main purpose of preparing budget are for economic development of a country by reallocating the resources so that to ensure balanced regional development, to reduce the inequality in the distribution of income and wealth, improve standard of living of the people,and to bring economic stability.

Components of budget.

Revenue Budget-deals with Revenue Expenditure and Revenue Receipts. Revenue receipts are from tax and non tax sources(dividend, profit). Revenue Expenditure includes salary, pension payments.

Capital Budget.- deals with capital receipts and capital expenditure. Capital receipts are from disinvestment, borrowings etc. Capital expenditure including repayment of borrowing, providing money to states

Other Budgets: Zero based budgeting,gender based budget. Zero budget is based on needs and it starts from zero. Gender based budgets are aimed at gender equality.

Steps in government budget.

PREPARING.

Is the most difficult step. Political considerations affect budget preparation. Both at state and local levels process are same . Recommendations are provided with chief executive. Ath this stage the govt programs which is already implemented and requires a change are considered and then new program will be added and recommended . President will issue guidelines for preparing budget. In February budget is presented. And SUBMITTING

APPROVING.

Approval of legislative body,state legislature, country council is needed. Local legal bodies will have the voting rights to support budget. Executive signature is required for approval from persons have veto power like President Governors and Mayor

EXECUTING.

There are many steps in execution like apportionment impoundment, allotment and preaudits.

MONITORING.

Here auditors check books of accounts to check the effectiveness of govt programs. There will ne state and local auditors.