What is a budget?

A budget is fundamentally a financial plan that estimates revenue and expenses over a specific period, typically covering a year or a quarter. It serves as a framework for understanding the financial goals of an individual or organization, enabling better decision-making about spending and saving. The creation of a budget involves assessing past financial performance, anticipated income, and expected expenses, ultimately guiding how resources are allocated.

In contrast, while records of accounts payable and receivable are essential for tracking cash flow, they do not constitute a budget. Reports outlining a company’s profits and losses focus on actual financial performance rather than projections. Finally, a detailed list of a company's assets provides valuable information about what the company owns but does not encompass planning for future financial activities. Thus, understanding a budget as a forward-looking financial tool makes it the correct choice, as it uniquely emphasizes the planning aspect of managing finances.