Question

In: Finance

Describe and discuss the apparent differences between government and business budget making. Are there any similarities...

Describe and discuss the apparent differences between government and business budget making.

  • Are there any similarities in their profit motives?
  • Provide at least two examples to support your perspective.

Solutions

Expert Solution

There are basically many differences between the government and business budget making and generally the business budget making is more flexible and there are less restrictions as compared to government budget making.

Here are some more differences:

1) The availability of resources in the government budgeting is very less as compared to business budgeting. The sources of revenues to the government is the tax revenues and the amount of tax revenues available to them is very low. So, they always have to make the choices between different choices due to the less availability of the revenues.

Also, the budgeting need to be very formal and need to be done in the specified format and sequence. There are various steps required like preparation of the formal budget , approval of the budget and then , at last the legal form of the budget which will be binding on the government agencies.

2) In the Business budgeting , contrary to the above, there is no restriction of any funds and also, no restrictions like preparation of the formal budget, etc. The business can spend their money in the way they want without any restrictions or without choosing any limited options.They can make various strategies in order to increase the sales revenues and to maximize the profit.

Yes , there are similarities between the business and the government budgeting in their profit motives.

The Examples are:

1) Both the government and the business's principles are the maximization of the social benefit while spending their incomes. They both utilize their resources in the best possible ways so that there can be less expenditures and high incomes.

2) Both the government and the business makes and follows certain policies and the guidelines for the maximization welfare. These involves the ways of the income generation and the patterns of the expense allocation.


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