Question

Critically examine modern classification of a budget.

Answer 1

1. Economic budget: The breakdown of government spending and its financing methods in specific income categories, such as spending on salaries, wages, market borrowings, etc., is referred to as economic classification. Information about consumption, investment, saving, the creation of financial assets and liabilities, etc., will be greatly aided by such a classification. Having effective programs and a budgetary picture of the overall amount of money spent by the government on its basic functions, programs, and activities will be made easier with this classification.
2. Functional budget: The division of government spending according to the various functions (tasks) that the government carries out or services that are provided, such as defence, education, health, transportation, construction, etc., is known as functional classification.
3. Planning and programme budgeting system: Long-term planning of government operations is integrated with the scheduling of specific actions for the future via the Planning and Program Budgeting System (P.P.S.E.). In order to achieve this, the planning system uses a variety of quantitative methods to assess the various budget ideas. System analysis and cost benefits are two methods used for a methodical evaluation of costs and benefits. In order to accomplish the intended goals, the relationship between inputs and outputs is a key component of programming budgeting systems.
4. Performance budget: Despite several attempts to implement it in various U.S. states in the 1940s, the first Commission Report’s publication in 1949 marked a significant advancement in performance budgeting. The commission’s study states that government-initiated initiatives and functions should serve as the foundation for the entire budgetary framework.