What is a budget?
A textbook definition of a budget is:
"A quantitive statement for a defined period of time, which may include planned revenues, assets, liabilities and cash flows. A budget provides a focus for the organisation, aids the co-ordination of activities and facilitates control."
CIMA's Official Terminology of Management Accounting
In practice a budget is a financial representation of planned activity for a given period of time. The basic principle is to compare the cost of the planned activity to the expected income the activity will generate and establish whether there will be a surplus (income exceeds cost) or deficit (cost exceeds income) at the end of the period. A surplus will mean that reserves have increased and a deficit leads to reduction in reserves.
The University is a not for profit organisation so the aim, unlike a business, is not to make surpluses or 'profits'. However we need to ensure that total income and total expenditure are broadly in line with each other.