Some keywords and concepts:
In general, the word “budget” stands for a theoretical model that offers an overview of costs and benefits that are in balance. A budget can be made for an individual household, a project, an organisation, an institution, a state or a project that offers a flight to planet Mars and back. The verb “budgeting” stands for the activity of using the concept of a budget over time.
When you deduct all costs from all benefits, the result should be zero. In other words: benefits should be equal to costs.
The virtual aspect of budgeting
Budgeting is based on assumptions and predictions, as it is an activity largely concerned with calculating and estimating future costs and speculating on future benefits. A budget is not a static instrument, but an instrument that is continuously seeking balance during a project. During the time a project is developed and is running, new insights, new information, new costs and new benefits will come up. These changes need to be included in the budget at all times. A budget will be updated many times over the course of a project. Ideally, the realisation of the project will be largely identical to the last version of the budget.
The function of a budget
A budget is the main instrument for staying in control when managing a project. It will help one to make informed decisions, to estimate the scope of a project and to reduce risks. A budget is also needed to convince other parties to invest in a project and to help those parties to weigh their risks. The instrument itself is a balance. The result of balancing should at all stages of using the instrument be zero (0); benefits must equal costs.
costs
Costs are all the products, labour, ideas, creative concepts under copyright needed to realise a project that cost something, generally expressed in monetised entities (money, euros, dollars, yens, renminbi, rands, etc.).
To change something into money, or to express something in terms of money or a currency. Elements ‘in kind’ (like a friend helping out without wanting to receive a fee or a studio that can be used for free) can also be capitalised (being worth a certain amount of money) and therefore expressed in monetary amounts.
All monetised income: return on investments, direct income (fees, tickets and products sold, copyright and neighbouring rights collected), profits, contributions from partners, sponsors, patrons and donations from funds or fundraising.
investments
Expenditure carried out or labour and services delivered with the intention of creating benefits but without certainty they will be compensated or pay off. This can include loans, contributions in kind, shares and your own time and labour.
profit
A financial gain, especially the difference between the amount earned and the amount invested or spent in buying, operating, or producing something. The bonus for taking risks.