What are budgets in an accounting context?

Budgets in an accounting context are primarily considered financial plans for income and expenses. They serve as a roadmap for an organization’s financial operations, helping to project future revenues and plan for expenditures. By establishing budgets, companies can allocate resources effectively, control costs, and guide decision-making over a specific period, usually on an annual basis but potentially for shorter or longer terms as well.

Creating a budget involves analyzing expected financial conditions and making strategic choices based on anticipated income and necessary expenditures. This planning tool is crucial for businesses to manage their cash flow, set financial goals, and assess whether they are on track to meet their financial targets.

The other options, while relevant to accounting, do not capture the essence of what a budget is. Documents for tax submissions relate to compliance and reporting obligations rather than proactive financial planning. Records of past transactions focus on historical data and do not involve future financial strategy. Summaries of company performance typically reflect results and achievements on a certain date rather than the planned financial outlook that budgets provide.