Budget item – Definition, what it is and concept

A budget item is an epigraph of a budget which carries out a forecast of income necessary to deal with expenses Planned for an exercise.

In a simple way, it consists in calculating the expenses that are going to be incurred in a specific item of a budget and from this data, provide a series of income to finance them. On the other hand, it can refer to the private sector, companies, or the public sector, the different administrations.

The budget and budget line

The budget includes all expected expenses and income over a period of financial year. In this way, in the private company it is related to costs and sales or provision of services. In the public sector, with the expenses and collection that are expected to be obtained by taxes, fees or public prices.

The budget, therefore, offers an overview of all the essential data in the current management of a company or administration. For its part, the budget item would be each of the parts of that budget, which coincide with its structure.

Procedure for carrying out a forecast

In the first place, for companies, it is necessary to know the expense that will be incurred. In addition, this information should be as detailed as possible. Thus, remembering the principle of prudent prudence, all expenses, including the most unlikely, must be taken into account. But regarding income, these should only be included if they are real or their occurrence is so likely that they can be considered that way.

It is normal to start with a detail of expenses. Types, amounts, maturities or any other relevant information. Once this step has been completed, the way to finance such expenditure through income must be studied. Of these it is also essential to know types, amounts or maturities. Once we know how to finance spending with income, we combine all these items into a global budget.

In the budget administration, it has somewhat more complex legal procedures. First it must be planned, then the appropriate body must approve it and then it is provided with the corresponding collection forecast.

Types of items in a budget

Normally the structure will depend on the objective pursued, although in companies it is usual that it be by departments and in the administration by types of spending programs. Thus, we can do the following:

  • In the public sector It is usually classified according to the expenditure that is budgeted. In this way, it is usually differentiated between current and capital expenditures. This is the most relevant, because revenues must have the same nature, that is, they must be current for this type of expenditure and in the long term, for capital expenditure. They are also usually classified by sectors or programs, and even by geographical area.
  • In relation to the private company We can find items related to purchases and sales, production, human resources. In general, it will depend on how the organization chart is and what type of departmentalization is chosen.

Some examples of public and private budget items

Here are some examples:

  • The departure for social programs, such as training courses for the unemployed. In this case it would be from the public sector.
  • A specific item for specialization courses for factory engineers. In this case it would be the private sector.
  • A budget to carry out a program to protect battered women. We meet again with a game of the public sector.
  • A budget to finance the expansion of an assembly plant for a particular product. We would be facing a private budget item.