Components/ Structure of Budget

There are mainly two components of budget, i.e., (i) Revenue Budget and (ii) Capital Budget. 

1. Revenue Budget

The revenue budget includes the revenue aspect of the Government budget. This budget shows the current receipts of the Government and the expenditure that can be met from these receipts. A Revenue Budget is a statement of estimated revenue receipts and expenditures during the fiscal year. It describes how the revenue is generated(collected) by the Government and how it is distributed among various heads of expenditure. 

The Revenue Budget can be further classified into two parts:

(i) Revenue Receipts:

Revenue receipts are those estimated receipts of the Government during the fiscal year which do not affect the assets or liabilities status of the Government. The Government receives it in everyday activities. 

(ii) Revenue Expenditure:

Revenue Expenditures are those estimated expenditures of the Government during the fiscal year which do not affect the assets or liabilities status of the Government.

2. Capital Budget

The capital budget includes the capital aspect of the Government budget. It is an account of assets and liabilities of the Central Government, which considers changes in capital. This budget shows the capital receipts of the Government and the expenditure that can be met from these receipts. A Capital Budget is a statement of estimated capital receipts and expenditures during the fiscal year.

The capital budget can be further classified into two parts:

(i) Capital Receipts:

Capital receipts are those estimated receipts of the Government during the fiscal year which reduce financial assets or create financial liabilities. These are obtained by the Government by raising funds through borrowings, recoveries of loans, and selling assets. 

(ii) Capital Expenditure:

Capital Expenditures are those estimated expenditures of the Government during the fiscal year which result in the formation of physical or financial assets or a reduction in financial liabilities. It includes acquisition of machinery and equipment, investment in shares, and advances by the Central Government.

It can be concluded that the budget is an annual statement of the Government’s estimated revenues and expenditures for a fiscal year. The Government budget is a statement of Government income and expenditure, much like your family budget, it is all about what you earn and spend. The Government has to get approval for the budget from the Parliament. It plays a vital role in the stabilization of the economy.