BUDGET CYCLE Meaning and
Definition
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The term "budget cycle" refers to the time period during which the various stages of budgeting are completed and repeated in an organized and systematic manner. It encompasses the entire process of preparing, reviewing, approving, implementing, monitoring, and evaluating a budget within a specific timeframe.
The budget cycle typically begins with the initial budget preparation phase. This involves collecting and analyzing financial data, setting financial goals and objectives, forecasting incomes and expenditures, and making critical decisions regarding allocation of resources. Following this step, the budget proposal is usually presented to the relevant authorities for review and approval.
Once the budget has been approved, it enters the implementation phase where the planned expenditures are executed, and funds are allocated as per the budgetary restrictions and guidelines. Throughout this phase, proper financial controls and monitoring techniques are put in place to ensure that the budget is adhered to and any deviations are addressed promptly.
The subsequent stage in the budget cycle is the monitoring and evaluation phase. This involves regularly reviewing financial performance, comparing actual results with budgeted figures, identifying any variances, analyzing their causes, and taking appropriate actions if necessary. This phase serves as a mechanism for improving future budget cycles by learning from past experiences and making necessary adjustments.
The budget cycle comes to a close with the preparation of a new budget. Lessons learned from the previous cycle, changes in financial conditions or organizational goals, and other factors are taken into consideration during this phase to develop an updated and effective budget for the upcoming period.
In summary, the budget cycle refers to the sequential process of budgeting that includes preparation, review, approval, implementation, monitoring, and evaluation of a budget within a defined time frame.
Etymology of BUDGET CYCLE
The word "budget" comes from the Middle French word "bougette", which referred to a small bag or purse used to carry money. It later evolved into the Old French word "bouget", meaning "bag" or "wallet". In the late 18th century, the word was adopted into English with the same meaning.
The term "cycle" comes from the Latin word "cyclus", which in turn came from the Greek word "kyklos", meaning "circle" or "wheel". It entered the English language in the 14th century and initially referred to a recurrent series of events or actions.
When combined, the term "budget cycle" refers to the recurring process of preparing and managing a budget over a specific period of time, usually a fiscal year.
