Budget - Types of Budget

Budget

A budget is a financial document or pre-plan of action for organization. It is a systematic process to anticipated the expenses and return for a given period. It’s a plan for managing money. Through this, one can know the expenses against its income (Harvard Business School Press, 2009). By making a budget, one can anticipate that how much money they have and what actions will be taken by this as well as the return over it within given time frame. It is also a useful technique to avoid the unexpected expenses and it leads saving. Business organizations are using budget to analyze the cost-benefit of their business operation. It helps to know that should they continue business operation or not. This post would be useful to students looking for assignment help related to budgets and types of budgets.

Types of budget

Fixed budget: It is financial plan which does not change throughout the budget period as it is also said to be static budget. Generally, the organization where sales volume is predictable use fixed budget. This helps to single level of business activity. It is also used for controlling, planning and evaluating business operations (Grossman & Livingstone, 2009).

Flexible budget: The budget that can be change according to the volume of services of business, said to be flexible budget. It is also called variable budget. It allows adjustment of revenue and expenses accordingly to up and down. This budget provides better management in all circumstances (Shim & Siegel, 2008). It is very useful for business as it can be changed throughout the budget period.

Cash Budget: Cash budget are important for cash management. Cash planning and controlling are undertakes in cash budget. It’s meant to know expected cash flow and outflow during a specified period in the organization. Cash management helps in avoiding to keep idle cash and also unexpected borrowings in business. It is a very important aspect of organization as its help in smooth functioning of business.

Capital Expenditure budget: This budget is related to the long term project of organization. It includes management of those funds, which requires for acquiring long term project in business. It helps in calculating the cost of project as well as the timing of capital expenditure. It’s also list out the sources of capital for financing the project as it increases the cost and time effectiveness of business (Shim & Siegel, 2008).

Program budget: This budget is concerned with the different programs of organization. Research & development, marketing and training are some examples of program activities. It’s majorly concerned with the problem of resource allocation and helps the manager to improve their managerial skills.

Master budget: An organization carries many activities. Master budget involves all operational areas of organization such as sales, production and so on. All the operations of organization are interdependent to each other and also effected to each other. This budget is considered this factor and includes all budgets in one. It is called master budget (Needles, Powers & Crosson, 2010). Master budget is not only flexible but also includes all the operations of organization. If any change occurs, only master budget has to be change. It creates time and cost effectiveness for organization as it’s save time and cost.

References
Grossman, T. & Livingstone, J.L. (2009). Portable MBA in Finance and Accounting (4th ed.). USA: John Wiley and Sons.
Harvard Business School Press (2009). Preparing a budget: expert solutions to everyday challenges. USA: Harvard Business Press.
Needles, B.E., Powers, M. & Crosson, S.V. (2010). Financial and Managerial Accounting (9th ed.). USA: Cengage Learning.
Shim, J.K. & Siegel, J. G. (2008). Budgeting Basics and Beyond (3rd ed.). USA: John Wiley and Sons.
Warren, C. S. (2008). Survey of Accounting (4th ed.). USA: Cengage Learning.