Question

Discuss major discretionary budget eliminations. Why is it important that government budgets accurately estimate future revenues during economic downturns?

Answer 1

ANSWER

As per the given question,

• Budget is an essential part of planning for the growth of any business or organisation. Budget is successful, if it contains all essential elements relating future revenue and expenses. However, it will not play any role in planning, if there is discretionary expenses as well in budget. We have to avoid them for getting a better picture upcoming situation.
• Following are some key points to be keep in mind while preparing budget and are treated as major discretionary budget eliminations :-

1. Review your Expenses :- All the expenses that you have considered in budget must be reviewed and must check the essentiality of that expenses. Also, check the benefit or return from that expenses which you have considered in budget.
2. Review your Management :- While creating budget, management also plays an important role because all the operations are in control of management. While creating budget, must review management & working process of organisation so that the expenses on repetition of same process will be eliminated from budget.
3. Review your Resources :- Budget may be failed due to improper utilisation of available resources. Therefore, must review the resources handling process to eliminate the effect of wastage of resources from budget.

• For government, it is also necessary to estimate future revenue accurately during economic downturn because it will helpful to overcome from the current situation and for making proper budget for benefit of society in best possible manner. For government, tax collection is the main source of revenue and during economic downturn, this will affect significantly. Therefore, government has to estimate revenue appropriately for maintaining balance in economy.

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