Budgeting is normally done with the respect to a short time frame such as 12 months, however; may take place for the long or middle budget horizon as well. It is done with consideration to projects and also sources of income or expense. Planned versus actual are tabulated and the differences reconciled and discussed.
It is a wonderful planning tool to keep checks and balances on performance and cash while still motivating managers to make additional effort and better communicate overall plans. It is really a tool that helps management make decisions that relate to trade-offs because it models the outcome given a strategic plan and estimated performance of operations and business cycles.
The type of budget created depends on the decision maker´s needs.
For any type of budget the guiding rule is to not spend more than you take in since this would lead to negative profit and the company would then be considered no longer a "going concern".