Balanced, Surplus and Deficit Budget

What is Budget?

A budget is an approximation of revenue and expenses over a defined future time frame; it is organized and reconceptualized on a periodic basis. Budgets can be outlined for a person, a family, a group of people, an entity, a country, a multinational organization, a government or just anything else that makes and spends money. At institutions and organizations, budget is an internal mechanism inculcated by the management and is often not required for reporting by external parties.

Budget is classified into 3 parts and they are:

  • Balanced Budget
  • Surplus Budget
  • Deficit Budget

Balanced, Surplus and Deficit Budget

What is Balanced Budget?

A balanced budget is a condition in financial planning or the budgeting procedure where total revenues are equivalent to or greater than the total expenditure. A budget can be contemplated balanced in experience after a complete year’s account of revenues and expenses have been recorded. A company’s budget for the upcoming year can be called balanced based on anticipations or approximate values.

What is Surplus Budget?

A surplus budget is a condition when income or receipts overreach costs or outlays (expenditures). A surplus budget normally refers to the financial conditions of the governments. However, individuals choose to use the term ‘savings’ rather than ‘budget surplus.’ Surplus is a manifestation that the government is being effectually operated and regulated.

What is the deficit Budget?

A budget deficit materializes when expenses overreach revenue and it is a symptom of financial health. The government normally uses this term to its spending instead of entities or individuals. Accrued government deficits form national debt.

3-4 MARKS QUESTIONS
Q.1- WHAT DO YOU UNDERSTAND BY THE TERM “BALANCED BUDGET”. WHAT ARE THE MERITS AND DEMERITS OF BALANCED BUDGET?
ANSWER:
(A) MEANING
  • A government budget is in balance if only the Budget Receipt is similar and equal to the Budget Expenditure.
  • Budget Expenditure=Budget Receipts.
(B) MERITS AND DEMERITS OF BALANCED BUDGET Merits

a) It ensures financial stability.

b) It avoids wasteful expenditure.

 

Demerits

a) Process of economic growth can be hindered.

b) Welfare activities may be restricted.

Q.2- WHAT DO YOU UNDERSTAND BY THE TERM “UNBALANCED BUDGET”. WHAT IS THE SIGNIFICANCE OF DEFICIT BUDGET?
ANSWER:
(A) MEANING AND TYPES OF UNBALANCED BUDGET A government budget is said to be unbalanced if estimated government receipts are not equal to the estimated government expenditure.
(B) TYPES OF UNBALANCED BUDGET Surplus Budget

  • Estimated Govt. Receipts > Estimated Govt. Expenditure
  • Budget is surplus if the estimated government receipt is more than the estimated government expenditure.

Deficit budget

  • Estimated Govt. Expenditure > Estimated Govt. Receipts
  • Budget is a deficit when the estimated government receipts are less than the estimated government expenditure.
(C) SIGNIFICANCE OF DEFICIT BUDGET a) It accelerates the economic growth.

b) It enables to undertake welfare activities.

 

1 MARK QUESTIONS
Q.1- DEFINE BALANCED BUDGET.
ANSWER:

A government budget is said to be in balance if budget receipts are equal to the budget expenditure.

Q.2- WHEN IS BUDGET SAID TO BE A ‘SURPLUS BUDGET’?
ANSWER:

If budget receipts are more than the budget expenditure, then the budget is termed as ‘Surplus Budget’

Q.3- WHEN IS BUDGET SAID TO BE A ‘DEFICIT BUDGET’?
ANSWER:

If budget receipts are less than the budget expenditure, then the budget is termed as ‘Deficit Budget’.

The above mentioned is the concept that is explained in detail about Balanced, Surplus and Deficit Budget for the class 12 students. To know more, stay tuned to BYJU’S.