10 most important Principles of Budgeting in management


10 most important Principles of Budgeting in management are:

a) Planning:

It is one of the major principles of preparation of budget. For efficient work, planning is essential. Planning is for long term and budget is for short term. Planning and programming are two sides of the same coin. In India planning is one of the steps in case of budgeting.


b) Research:

After planning, the next stage is research. Research entails determination of national need and resources and global conditions. The present world is a single composite unit any change in any part of the world would have wide repercussion in other parts of the world. Planning for future depends on statistical information’s collected from various sources.

c) Balancing the Budget:

By and large, the budget has to be balanced which is an indication of sound financial management. In case of an unbalanced budget, this sooner or later weakens the strength of the investors or public.


Balancing the budget does not mean that expenditure is balanced with income, in some cases, there may be deficit but this deficit should be planned in advance.

d) Control:

Supervision of the financial flow to various departments implies the importance of control in budget.

e) Executive discretion:


Executives implementing the budget must enjoy certain degree of discretion.

f) Annularity:

Under this principle, money is spent to the various departments and executives for one year. Any amount left unspent during the budget year, the approval stands lapsed and it cannot be spent until it is further approved for the next budget year.

g) Executive Responsibility:


For the purpose of granting funds, the executives must make estimate of expenditure and then present it. The amount can be moved from one head to another, after seeking approval from the president.

h) Rule of lapse:

Rule of lapse means that under this rule, if the money is left out, the approval of the money lapses, the funds cannot be spent until further approval is granted.

i) Classification:


The expenditure must be classified in an efficient manner in the budget because of easy understanding. The revenue thought to be classified into various heads.

j) Unity:

The various expenditures estimated in the budget and all revenue is generated at one amount, from where all expenditures are met.

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