What is the difference between Budget and Projection?
CA Harish Suwalka
(Chartered Accountant ( Bhilwara ))
(4125 Points)
Replied 18 January 2010
Difference between Budget and projectin
Once the financial objectives have been set, it is possible to prepare and agree a budget. A budget should relate the overall plan in figures. It is different from a projection in the sense that the plan, and therefore the budget, sets minimum requirements, whereas a projection is usually an expectation of what is likely to happen.
Example
You might choose to budget for sales of Rs. 180,000 and use this figure in calculating your likely expenditure, profit and so on. Based on your market research, however, you predict sales of Rs..200,000, and set a target of Rs.220,000, in order to stretch your sales force. If all your costs are covered by the budgeted figure, then you will make a greater profit if you achieve the projection and a still greater one if you achieve the target. (Whilst this is an importtant distinction, in practice for most businesses the projection and budget will be the same.)
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