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Chapter 27. Budgeting > What Is a Budget?

What Is a Budget?

A budget is a financial plan. It looks similar to a financial statement—just like the ones you produce for your company—but the numbers on the budget are based on goals, past performance, and consideration of future trends, rather than the actual transactions that make up your standard financial statements.

Often, you use the income and expense numbers of the prior year as the starting point for a budget. Then you must consider your knowledge of the future expectations and anticipated trends of your industry and adjust the budget numbers to embrace those trends. In addition, you’ll want to throw in a dose of your personal experience with the way your business operates and the way you expect it to operate so that you can build a budget that accurately reflects your goals and reasonable expectations for the year or years ahead.


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