What the above definition is stating, is that a budget provides the basis for achieving targets for business growth. In order to achieve long term prosperity, a business must regulate it's income and expenditure. Budgets allow managers to look at how their departments are performing in real life against planned activities. By having budgets and monitoring performance, managers can exercise control by ensuring departments are bought back under control. By ensuring departments operate in an efficient manner, the business should be able to reward individual departments which outperform targets.
Budgets are also good way of monitoring managerial performance in relation to achieving targets.
Budgets are based on both projected financial costs and revenues. Budgets are set at an agreed level between departmental managers and their peers for agreed performance targets. Generally sales teams will try to maximize sales revenue, whilst operational departments will aim to reduce expenditure as much as possible. Allows for analysis by comparing actual against forecasted predictions. Motivates managers by involving them in top level business planning.