Understanding Budgeting, Taxes, and Statistical Concepts

Zero-Based Budget

Zero-based budget is a method of budgeting in which all expenses must be justified for each new period. The budget starts at a zero base, and every function within the organization is being analyzed for its needs and costs. Therefore, budgets are built based on what is needed for the upcoming period, regardless of the size of the budget.

Taxes

A compulsory contribution to state revenue. It is mandatory to pay taxes, and they are levied by the government on workers' income and business profits or added to the cost of goods, services, or transactions. Taxes raise money for government services that are later used for the well-being of society.

Fiscal Year

October through September next year. February president proposes. Budget committee reaches budget resolution. Approved by house & senate, distributed again throughout committees that figure out the distribution of the money. Then conference committee where house & senate reach a reconciled final version. President either approves or vetoes it.

Difference between Private Entities and Nonprofit Entities

Private entities are more concerned about staying alive and making a profit, and the budget is usually much larger and weaker, while nonprofit entities are concerned with maintaining the infrastructure and providing security and welfare to the community.

Central Limit Theorem

Statistical theory that states that given a sufficiently large sample size from a population with a finite level of variance, the mean of all samples from the same population will be approximately equal to the mean of the population. Furthermore, all of the samples will follow an approximate normal distribution pattern, with all variances being approximately equal to the variance of the population divided by each sample's size.

Survivorship Bias

Survivorship bias or survival bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility. This can lead to false conclusions in several different ways. It is a form of selection bias. It occurs when observations are lost or discarded before the analysis is conducted, thereby skewing the remaining sample.

Cluster Sampling

Divide the population into similar clusters, then draw observations from several randomly chosen clusters.

Stratified Sampling

Randomly choose observations from within a set of defined subpopulations (strata) to ensure that each stratum is equally represented in the sample as in the population.

Types of Budgets

The program budget is a budget that is prepared specifically for a project or program. This type of budget includes expenses and revenues related to a specific project only. No revenues or expenses of any other project are mixed with this particular project. A performance budget reflects the input of resources and the output of services for each unit of an organization. An expenditure budget shows the revenue and capital disbursements of various ministries/departments and presents the estimates in respect of each under 'Plan' and 'Non-Plan'.

Government Role

Identify and protect property rights, commonality of general trade, public goods and services such as defense and law enforcement, facilitate fair trade practices, and ameliorate market failure.

Type Errors I and II

A type I error occurs when the null hypothesis is rejected even though it is true, and the alternative hypothesis is falsely accepted. A type II error occurs when the null hypothesis is accepted even though it is false, and the alternative hypothesis should have been accepted.