Essay on Budget Preparation

Paper Type:  Essay
Pages:  4
Wordcount:  1046 Words
Date:  2022-06-13


Money and time are resources to almost all individuals and business organizations. It is therefore essential to plan for the efficient and effective use of these resources. However, planning alone is not insufficient as control is also necessary to ensure that planning is executed appropriately. A budget is a device used by managers to help them plan and control the use of the stated scarce resources. A budget is equally a plan that shows the objectives of the company and how the management of a particular organization intends to acquire the resources and use them to achieve those objectives. Schiavo (2007) mentions that it is for this complexity of the budget process that the study plans to inquire about the budgeting process in the public and private sectors.

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According to Schick (2015), the process of budgeting generally involves planning for future profitability because the basic objective of a company is to earn a reasonable return on the resources employed during production process. However, it is wise for the management of the company to come up with measures that will help deal with uncertainties that might occur in the course of operating a business. It would be important to note that budgeting in the public organization is fundamentally different from that of private companies (Schiavo, 2007). The differences are in terms of the purposes for the budget, methods of accounting and the manner or process in which they are carried out. It is therefore worth for any manager and learners to understand the difference between the motives in public and private budgeting. Firstly, in looking at the purpose of budgeting, it is true to state that the goal of any private sector company is to generate high profits as possible. Here, a manager responsible for handling finances must always keep an eye on the minimum profit levels. However, public companies are most specifically created to service a given pressing need in the interest of the public such as officers 'enforcing law to protect the public. In this case, the financial managers are therefore required to use the public funds in the most efficient way because the main purpose of public organizations are not profit motivated. Secondly, in considering decision making, in the private organizations, decisions are made at the top after which it is handed down in a command chain. In this case, the operation of the business becomes responsive and fast.

It is interesting to note that a lot of pressure is however piled on the decision makers. Decisions in the public sector are however made differently. In addition to the above, public organizations budgets invite a certain level of public participation and this is the reason why public companies appear transparent than the private business. This is in line with the regulations concerning public resource. Lastly, considering accounting procedure, it had been observed that in private organizations, the managers are kept more tightly than those in the public organizations. In the private sector, accountants must adhere to the internationally accepted accounting principle which is not the case with the public organizations.

Operating and Funding Sources of Public Revenue

It is essential to admit that without total funding from the revenue sources, organizations cannot be able to implement their budget proposals. To be able to do this, there are various sources of revenue that need to be put in place. They include the following:


This is a compulsory payment imposed by authorities against which those paying tax have no claim. It is however not exposed as a penalty. The essence of charge is that it has no direct exchange of favor like other sources. (Schick, 2015)


These are local taxation. They are levied by the local authority and not the central government. The rates are proportional to the rentable value that has been estimated on properties and businesses.


It is a payment to cover the cost of each service provided by the government most specifically in the public interest.

License fee

A fee is paid in situations in which the authority of the government is summoned, so that privilege or permission is conferred.

Fine and Penalties

These are a charge imposed on people as punishment for going against the law of the land. The objective is though not to raise revenue from the public but to make them follow the rules and orders of the country

Gifts and Grants

A gift is a voluntary contribution from private persons or other private entities to the government for specific purposes like defense fund during war emergencies. It however, constitutes a smaller portion of government revenue

Paper Money

This is a method of creating extra money through the printing of more paper money. It is usually avoided because once started; it is difficult to stop.


This is another critical source of public revenue. It includes loans from the public sector in the form of bonds, deposits among others as well as loans from other foreign agencies.

Effects of Demographics on Public Revenue Services

This factor has a significant impact on public sources of revenue. It primarily impacts on the fiscal burdens of the people in a given society. Demographics can include changes in; population growth whereby with increased population, the government will be able to raise more revenue. It also includes fertility rate which if the rates are high, it will lead to increased number of people which will in term improve revenue collection and vice versa (Cuillier & Stoffle, 2011). Household composition is also part of a change in demographics whereby if the house comprises more male engaged in production activities; more revenues will be collected. Life expectancy, the health status of the people and age distribution also include changes in demographics.


Budgeting is a very delicate and important process that should therefore be treated with utmost care and precision in its implementation process by ensuring that all objectives are achieved. This will enable both private and public organizations to keep pace with development requirements of their companies.


Cuillier, C., & Stoffle, C. J. (2011). Finding alternative sources of revenue. Journal of Library Administration, 51(7-8), 777-809.

Schiavo-Campo, S. (2007). Budget preparation and approval. Local Public Financial Management. Washington, DC: Banco Mundial.

Schick, A. (2015). The road to PPB: The stages of budget reform. In Public Budgeting (pp. 39-56). Routledge.

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