Before we proceed further, let's take some time to understand the basic concepts of commitment control.
Commitment control can be used to track expenses against pre-defined control budgets as well as to track recognized revenue against revenue estimate budgets. In this chapter, we'll concentrate more on the expense side of commitment control, as it is more widely used.
An organization may draw budgets for different countries in which it operates or for its various departments. Going further, it may then define budget amounts for different areas of spending, such as IT hardware, construction of buildings, and so on. Finally, it will also need to specify the time periods for which the budget applies, such as a month, a quarter, six months, or a year.
In other words, a budget needs the following components: