Budget

Bases;Based on Time;Based on Condition;Based on Functions; and,Based on Flexibility.These are explained below;Types of Budget Based on TimeBased on time factor budgets can be classified into two types;Long-term Budget, andShort-term Budget.Long-term BudgetThis budget is related to the planning operations of an organization for a period of 5 to 10 years. The long-term budget may be adversely affected due to unpredictable factors. Therefore, from a control point of view, the long-term budget should be supplemented by short-term budgets.Example: Research and Development Budget, Capital Expenditure Budget, etc.Short-term BudgetThis budget is drawn usually for one year. Sometimes a budget may be prepared for a shorter period (like monthly budget, quarterly budget, etc.). Short­term budgets are prepared in detail and these budgets help to exercise control over day-to-day operations.Example: Material Consumption Budget, Labor Utilization Budget, Cash Budget, etc.Types of Budget Based on ConditionBased on conditions prevailing, a budget can be classified into 2 types;Basic Budget, andCurrent Budget.Basic BudgetA budget that is established for use as unaltered over a long period is called Basic Budget.This budget does not take into consideration changes occurring from the external environment which are beyond the control of management. This budget is more useful for top-level management for formulating policies.Current BudgetA budget that is established for use over a short period and is related to the current conditions is called the Current Budget. This budget is adjusted to the current conditions prevailing in the business.Types of Budget Based on FunctionsBased on activities or functions of a business, budgets can be classified into 2 typesMaster Budget, andFunctional Budgets.Master BudgetThe final integration of all functional budgets by the Budget Officer provides the Master Budget. When functional budgets have been completed, the Budget Officer prepares the Master Budget.Master Budget is the summary budget incorporating its component functional budgets, which is finally approved, adopted and employed. [C. I. M. A. (London)l.Master Budget shows the operating profit of the business for the budget period and budgeted balance sheet at its close. This Budget portrays the overall plan for the budget period.The master budget consists of several separate but interdependent budgets. The first step in the budgeting process is the preparation of the sales budget, which is a detailed schedule showing the expected sales for the budget period. An accurate sales budget is the key to the entire budgeting process.If the sales budget is inaccurate, the rest of the budget will be inaccurate. The sales budget is based on the company’s sales forecast, which may require the use of sophisticated mathematical models and statistical tools.We will not go into the details of how sales forecasts are made. This is a subject that is most appropriately covered in marketing courses.The sales budget helps determine how many units

Need to be produced.Thus, the production budget is prepared after the sales budget. The production budget, in turn, is used to determine the budgets for manufacturing costs including the direct materials budget, the direct labor budget, and the manufacturing overhead budget.These budgets are then combined with data from the sales budget and the selling and administrative expense budget to determine the cash budget.A cash budget is a detailed plan showing how cash resources will be acquired and used. After the cash budget is prepared, the budgeted income statement and then the budgeted balance sheet can be prepared.Functional BudgetsFunctional Budgets relate to functions of the business such as product sales etc. In other words, Functional Budgets are prepared in respect of various functions performed in a business.Functional Budgets which are commonly found in a business concern are as follows;Sales Budget;Production Budget;Material Budget;Labor Budget;Production Overhead Budget;Administration Overhead Budget;Selling & Distribution Overhead Budget;Plant Utilization Budget;Cash BudgetResearch & Development Budget and more.Sales BudgetThe sales budget is the starting point in preparing the master budget. The sales budget is constructed by multiplying budgeted unit sales by the selling price.A schedule of expected cash collections is prepared after the sales budget. This schedule will be needed later to prepare the cash budget.Cash collections consist of collections on credit sales made to customers in prior periods plus collections on sales made in the current budget period.Production BudgetThe production budget is prepared after the sales budget. The production budget lists the number of units that must be produced to satisfy sales needs and to provide for the desired ending inventory.Production needs can be determined as follows:Budgeted unit sales……………… XXXXAdd the desired ending inventory… XXXXTotal needs………………………….. XXXXLess beginning inventory……….. XXXXRequired production……………… XXXXNote that production requirements are influenced by the desired level of the ending inventory. Inventories should be carefully planned. Excessive inventories tie up funds and create storage problems.Insufficient inventories can lead to lost sales or last-minute, high-cost production efforts. At Hampton Freeze, management believes that an ending inventory equal to 20% of the next quarter’s sales strikes the appropriate balance.Cash BudgetThe cash budget is composed of four major sections:The receipts section.The disbursements sectionThe cash excess or deficiency section.The financing section.The receipts section lists all of the cash inflows, except for financing, expected during the budget period. Generally, the major source of receipts is from sales.The disbursements section summarizes all cash payments that are planned for the budget period.These payments include raw materials purchases, direct labor payments, manufacturing overhead costs, and so on, as contained in their respective budgets.Also, other cash disbursements such as equipment purchases and dividends are listed.The budget is the forecast of expected cash receipts and cash disbursement during the budget period. The importance of cash

Templates EDITABLE Paycheck Budget with Cash Envelopes Income Source (Budget, Actual, Income Total) Sinking Funds (Budget, Actual, Sinking Funds Total, Amount Left) Savings (Budget, Actual, Savings Total, Amount Left) Bills (Due, Budget, Actual, Bills Total, Amount Left) Debts (Budget, Actual, Debts Total, Amount Left) Cash Envelopes (Budget, Actual, Cash Envelopes Total, Amount Left) Budget Summary (Income Total, Sinking Funds Total, Bills Total, Debts Total, Cash Envelopes Total Minimal Monthly Budget Tracker Budget Goal Income (Date / Description / Amount / After Tax Fixed Expenses (Date / Description / Amount / Total) Other Expenses (Date / Description / Amount / Total) Recap (Goal / Actual / Difference Earned / Spent / Debt / Saved EDITABLE Weekly Budget - Original Style Month Last week outcoming Planned, Extra, Total Planned budget for the week Actual outcoming of the week Difference Notes Weekly Budget - Casual Style Month Last week outcoming Planned, Extra, Total for each day Planned budget for the week Actual outcoming of the week Difference Notes Weekly Budget - Floral Style Month Last week outcoming Planned, Extra, Total for each day Planned budget for the week Actual outcoming of the week Difference Notes Print ready plannersShow all print ready planners

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