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<br /> <br />Why Budgets are Important <br /> <br />. Net income is not a good measure of <br />government effectiveness <br />- Excess of revenues over expenditure does not <br />mean success, but indicates whether the funds <br />received are in excess of the funds expended <br />- Since the funds received are often the result of <br />transfer and other sources, tax revenues are not <br />equivalent to sales as a measure of success in the <br />marketplace <br /> <br /> <br />. A budget is a financial plan submitted to the <br />appropriate body for approval <br />. Once approved, budgets carry the status of law <br />- When voted upon, an appropriation act gives the <br />legal authority to spend and generally sets the <br />maximum limit for spending <br /> <br /> <br />Importance of Budget Reporting <br /> <br />. The primary means of government control is <br />the budget <br />- Financial statements should answer the question - <br />Did the government use its funds as promised? <br />- Budget amounts are incorporated in accounting <br />records of the General Fund and special revenue <br />funds to provide information that will keep spending <br />within the legal limits. <br /> <br />10 <br />