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What are the types of Budget?


As we know budget is a plan, which helps to control our expenses according to our income for fixed period of time. Budgets are not only prepared by companies but it is also prepared by individuals to know their monthly expenses. Some types of budget prepared by companies are: master budget, cash budget, fixed budget, flexible budget, operating budget, financial budget, capital expenditure budget etc. Let’s explain what are these types of budget?
Master budget: This budget is prepared for quarterly or annually. The format of this budget is depends on companies nature and its type. It includes all the budgets in it.
1. Cash budget: It is a planning to manage cash operation efficiently. It is a cash inflow and outflow of business in fixed period of time. With the help of cash budget financial manager can predict the future cash inflow and outflow for fixed period. It is prepared for monthly, quarterly and annually period according the requirement of the company. The cash requirements can be predict with the help of cash budget. It helps the financial manager to know how cash is used in different activities and help to control the unwanted expenses.
2. Flexible budget: It helps to predict future income and expenses with the help of actual output. With the help of flexible budget financial manager can ascertain the changes with respect to change in output level by comparing with current output at the end of the accounting period. It also helps to predict income and expenses before accounting period started with the help of current output. It is also known as variable budget. In other words flexible budget help to ascertain the change in cost level with change in volume of output.



3. Fixed budget: It is just opposite of flexible budget. Fixed budget does not change with change in sales level or volume of output. It is also known as static budget. A financial manager can compare the actual output with predicted output with the help of fixed budget.
4. Operating budget: Under the operating budget total cost and revenue of all operational activities are estimated before the accounting period started. The operating budget is prepared for quarterly or annually period. It helps to estimate the total profit.
5. Sales budget: It helps to estimate the total revenue and sales unit for future period. The sales budget helps to set the target to sales department also the production department. The sales budget helps the production department to ascertain the number of units to be produced for future period. It also helps to predict the expenses related to sales activity in future.
6. Purchase budget: This budget is prepared to estimate the inventory level that the purchase department have to maintain in company. It helps to maintain the required level of raw material and purchase cost for future period.
7. Financial budget: Under the financial budget the cash and capital expenditure are estimated for future period. It helps to estimate the requirement of cash for running a business and capital expenditure to meet the long term requirements like maintaining building, maintainnance of machine in future period.
8. Program budget: This budget is prepared only for specific program for a fixed period like research and development, training program etc.


Comments

  1. kavithasathishMay 13, 2019 12:18 pm


    This is an awesome blog for the people who are really seeking information for this technology.
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  2. MoolamoreAugust 02, 2024 1:48 pm

    Understanding the different types of budgets helps organizations and individuals effectively manage their finances. Each type serves a specific purpose, from daily operations and long-term investments to personal financial planning and public sector expenditures. Choosing the right budget type depends on the specific needs, goals, and context of the budgeting entity. Best Cash Flow Forecasting Software | Financial Forecasting Tool

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