The EU budget finances activities ranging from common agricultural policy and cohesion policy to promoting human rights. The Commission, the Council and Parliament all have a say in determining the size of the budget and how it is allocated. The responsibility for managing the budget bears the European Commission. The aim of this paper is to present the role of annual budget of the European Union (EU). Each year's budget sets out the amounts agreed in advance according to a financial perspective. In the first part there is discussed the evolution of the structure of the EU budget. Next there is presented the budgetary procedure and the role of the European institution in approval of the annual EU budget. The paper discusses also the principles of the annual budget procedure. The last part is an analysis of the role of the budget for the Member States of the EU.