The Concepts of Budget

Definition: A Budget may be defined as a total estimated revenue and the proposed expenditure of aa government in a given period; usually a year.

IMPORTANCE OR USES OF BUDGET

National budget is used to achieve the following objectives.

• To allocate resources from one sector of the economy to the other.
•  It is used by the citizens and the international community to appraise the performance of the government. 
• It is used as a tool to curb inflation and deflation. 
• The government uses it as medium to communicate governments Economic objectives and policies to the citizenry. 
• It is used to foster Economic growth and development. 
  
  

            TYPES OF BUDGET

1. Balanced Budget: This is when the total estimated revenue is equal to the proposed expenditure. This means that nothing will be left as reserve from the money collected in form of revenue.
2. Surplus Budget: A Budget is called surplus, when the total estimated revenue is more than the proposed expenditure. In this type of budget, not all estimated revenue is proposed to be spent in that year. That is, there will be reserve.
3. Deficit Budget: This is the direct opposite of surplus budget, and it is when the government's total proposed expenditure for a period is more than the total revenue. The question that arises is - where does a government get the money it uses in financing deficit budget? The money does not come from heaven, rather through borrowing from the central and commercial banks, the public, printing of more currency, aids and grants etc.
   

OBJECTIVES AND USES OF DEFICIT BUDGET

The government usually has a budget deficit so as to achieve the following objectives among others.

(i) The government uses budget deficit to curb deflation. 

(ii) It promotes Economic growth and development though its Expansionary effect. 

(iii) It enhances production. 

(iv) The government also uses deficit budget to finance deficiency in employment opportunities. 

TYPES OF REVENUE AND EXPENDITURE

1. Recurrent Revenue: This is the amount of money collected by government from their usual regular sources of revenue, for example, taxes, rates, fees, fines, etc.
2. Capital Receipts: These are revenues that accrue to government through loans and grants from both local and foreign sources that are not regular. They are usually receipts from capital or developmental projects. 
3. Capital Expenditure: This is the proposed expenditure of a government on projects that will last for many years like roads, dams, sea and airports, hospitals, schools, etc.
4. Current Expenditure: These are expenses carried out by the government year by year. These expenses that continue to recur take the forms of Wages and salaries that are paid to civil servants every financial year. 
5. Monetary Policy: This is a delebrate attempt, by the government to control macro economic variables using volume of money in circulation and interest rate through the central bank. The instruments of monetary policy are: (i) Open Market Operations. (ii) Liquidity ratio. (iv) Cash reserve ratio. (v) Selective credit.