government budgeting

Government Budgeting – How It Works Budget word has been taken from the French word 'Budgette', that signifies 'wallet' or 'Leather bag'.

A government budget is a legal document passed by legislature and later approved by President or Chief-executive. The financial period begins from 1st April and ends on 31st of March and this document lists own all the expenses incurred and revenue earned during this tenur.

This document is surely one of the most significant documents as it gives clear picture of Government’s financial performance. The plan of the government with respect to finances is also presented in the document. People of India, ranging from a common man to the one’s having seat In Parliament wait for the budget to be presented because of the following reasons: •

The information regarding the performance of the government in the past financial year is made crystal clear in the budget.

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It helps you determine financial policies and programs of Government for the next financial year.

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To assess how the standard of living will be affected by Government budgeting for the next whole financial year.

Government budgeting is done at all levels, central, state or local. The civil bodies take decisions on behalf of the people. Government budgeting is done on the basis of social, economical, political and regional basis too. The Budgeting further depends on the Fiscal policies, monetary policies and Trade policies etc. The main intention behind preparing a budget is to the raise the revenue earned than the expenditure in a fiscal year.

In words of Mary Landrieu, a government budget should reflect the values and priorities of a nation and its people. To know about the facts about the UK government budgeting read below •

The UK fiscal year ends on March 31 of following calendar years. Thus, UK budget for fiscal or financial year 2012 would cover period from April 1, 2012 to March 31, 2013.

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A month before the fiscal year starts the budget is presented in UK i.e. in march.

Government decided on the proportions by summers.

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The prime minister has a complete control over the sessions of the parliament and hence as a result quick action on the budget is taken.

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Each department submits their individual funding request. This request is termed ‘Main Supply Estimates to HM Treasury. This data is consolidated and later released under the name of ‘Central Government Supply Estimates: Main Supply Estimates’.

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The agencies need to update the spending of the current year in totality and hence the government of UK keep with themselves the right to put forward in springs and winters of the fiscal year the ‘Supplementary Estimates’. In addition to ‘Supplementary Estimates’, agencies also need to submit ‘Estimate Memorandum’ to the oversight committee justifying and describing the changes.

Government budgeting and its components

Rene Storum right said, “budget is a document that contains introduction approved plan of public expenditures and revenues. According to Rene Storum, "A budget is a document containing a preliminary approved plan of public revenues and expenditure”.

The following are the two components of the government budgeting: 1)Revenue budget: This particular financial statement consists of Government’s revenue receipts.

Taxes and receipts are the sources of revenue for the government.

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Revenue receipts: This is earned by Government from all possible sources in the course of governance. There is no decrease in the assets and these receipts are free from liabilities.

These can be classified as follows:

A)Tax revenues: This income is collected from various taxes and duties. Hence it is one of the major portions of the revenue of the public. There are 2 different types of taxes: Direct taxes which include estate duty, corporation tax, property tax and income tax and indirect taxes include excise duty, custom duties, sales tax and service tax B)Non-Tax revenues: There are several non-tax sources from which Government collects revenue.

Some of them are fines and penalties, fees, profit from public enterprises, grants and gifts.

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Revenue expenditure: Revenue expenditure is the sum-total of expenses incurred on normal day-to-day expenses. This includes both non-developmental and developmental expenditures by Central Government.

2)Capital Budget: The capital account that is shown for the coming financial year, its expenses and expenditure are shown in the capital budget which Is a part of the whole budget. Capital budget comprises of Capital expenditure and Capital receipts.

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Capital Receipts: Creation of liability or reduction in assets, any of the two is the result of capital receipts. They are generated by raising funds via borrowings, disposition of assets and loan recovery. Capital receipts are Government borrowings through sale of securities and bonds, RBI and various other financial institutions.

Capital Expenditure: Any expenses incurred to create assets that have long life are termed as capital expenditure. Expenditure on machine, oil exploration, land, equipment and irrigation projects.