What is a line item budget?

A line item budget is a budgeting method used to keep track of purchases or costs of items associated with an organization's budget. Items in a line item budget might be grouped according to department, or categorized in some other manner. The line items consist of items' names and the financial expense or data associated with each.

Line item budgets can be used for accounting purposes to keep a record of all of an organization's costs or expenses concerning specific items. While used for accounting, line item budgets primarily are used for expense reporting. Some line item budgets keep records of items for these periods:

• Past item expenses

• Present item expenses

• Future item expenses

Here are the key elements of a line item budget:

• List item's costs

Many companies who utilize line item budgets create a section within them titled "Expenses". Some common expenses in this section of a line item budget include:

• Office supplies and materials

• Employee salaries, wages, and other forms of compensation

• Marketing expenses

• Any key services the company receives from other businesses

Each category of line items should receive its own subsection in this part of a line item budget.

• Record of previous year's expenses

This section of a line item budget contains the details of the previous year concerning expenses associated with key line items. It might include lots of detailed data and/or broad totals in terms of costs.

• Record of present year's expenses

This section of a line item budget tracks all of the expenses of an organization during the present year. Most use a section for each month for present expenses, and then the line items are broken down further by their category and title. Many organizations use the past and present sections to compare their expenses year to year.

• Future year expenses

Some companies also choose to create a future expenses section in their line item budgets. This is a projection of what they expect to spend in the future on specific items; usually, the projection refers to the following year.