BUDGET

A Budget Is A List Of All Planned Expenses And Revenues. It Is A Plan For Saving And
Spending. A Budget Is An Important Concept In Microeconomics, Which Uses A Budget Line
To Illustrate The Trade-Offs Between Two Or More Goods. In Other Terms, A Budget Is An
Organizational Plan Stated In Monetary Terms.

The Purpose Of Budgeting Is To:

1. Provide A Forecast Of Revenues And Expenditures I.E. Construct A Model Of How Our
Business Might Perform Financially Speaking If Certain Strategies, Events And Plans
Are Carried Out.
2. Enable The Actual Financial Operation Of The Business To Be Measured Against The
Forecast.

Budget Types:

Business Start-Up Budget

Corporate Budget

Sales Budget

Production Budget
Purchase Budget

Cash Flow/Cash Budget

Marketing Budget

Project Budget

Revenue Budget

Expenditure Budget

Master Budget
BUSINESS START-UP BUDGET

The Process Of Calculating The Costs Of Starting A Small Business Begins With A List Of All
Necessary Purchases Including Tangible Assets (For Example, Equipment, Inventory) And
Services (For Example, Remodeling, Insurance), Working Capital, Sources And Collateral. The
Budget Should Contain A Narrative Explaining How You Decided On The Amount Of This
Reserve And A Description Of The Expected Financial Results Of Business Activities. The
Assets Should Be Valued With Each And Every Cost. All Other Expenses Are Like Labour
Factory Overhead All Freshmen Expenses Are Also Included Into Business Budgeting.

CORPORATE BUDGET

The Budget Of A Company Is Often Compiled Annually, But May Not Be. A Finished Budget,
Usually Requiring Considerable Effort, Is A Plan For The Short-Term Future, Typically One
Year (See Budget Year). While Traditionally The Finance Department Compiles The Company's
Budget, Modern Software Allows Hundreds Or Even Thousands Of People In Various
Departments (Operations, Human Resources, It, Etc.) To List Their Expected Revenues And
Expenses In The Final Budget. If The Actual Figures Delivered Through The Budget Period
Come Close To The Budget, This Suggests That The Managers Understand Their Business And
Have Been Successfully Driving It In The Intended Direction. On The Other Hand, If The
Figures Diverge Wildly From The Budget, This Sends An 'Out Of Control' Signal, And The
Share Price Could Suffer As A Result.

SALES BUDGET

Sales Budget Is A Functional Budget. The Sales Budget Is An Estimate Of Future Sales, Often
Broken Down Into Both Units And Dollars. It Is Used To Create Company Sales Goals. The
Product Wise As Well As Regional Break Up Of Sales Estimates Are Incorporated In The Sales
Budget. The Sales Budget Begins With the Previous Year Actual and Incorporates the Likely
Changes
PRODUCTION BUDGET

Product Oriented Companies Create A Production Budget Which Estimates The Number Of
Units That Must Be Manufactured To Meet The Sales Goals. The Production Budget Also
Estimates The Various Costs Involved With Manufacturing Those Units, Including Labor And
Material. The Adjustments With Respect To The Opening And Closing Stock Positions That Are
Policy Decisions Of The Business Are Then Made To Prepare The Production Budget.

PURCHASE BUDGET

The Purchase Budget Is Another Functional Budget That Estimates The Purchase Requirement
Of Materials Utilized In The Production Process. The Purchase Budget Is Based On The
Production Budget And The Standard Material Consumption Requirement For The Production
Estimates.

CASH FLOW/CASH BUDGET

The Cash Flow Budget Is A Prediction Of Future Cash Receipts And Expenditures For A
Particular Time Period. It Usually Covers A Period In The Short Term Future. The Cash Flow
Budget Helps The Business Determine When Income Will Be Sufficient To Cover Expenses
And When The Company Will Need To Seek Outside Financing. The Cash Budget Is Based
Upon The Business Policy Of Holding A Certain Amount As Cash. This Is The Desired Opening
Cash Balance For The Business. Accordingly, The Cash Budget Forecasts The Loan
Requirements Or Short Term Investments That Are To Be Made With Excess Cash At Any
Specific Time.

MARKETING BUDGET

The Marketing Budget Is An Estimate Of The Funds Needed For Promotion, Advertising, And
Public Relations In Order To Market The Product Or Service.
PROJECT BUDGET

The Project Budget Is A Prediction Of The Costs Associated With A Particular Company
Project. These Costs Include Labor, Materials, And Other Related Expenses. The Project Budget
Is Often Broken Down Into Specific Tasks, With Task Budgets Assigned To Each.

REVENUE BUDGET

The Revenue Budget Consists Of Revenue Receipts Of Government And The Expenditure Met
From These Revenues. Tax Revenues Are Made Up Of Taxes And Other Duties That The
Government Levies.

EXPENDITURE BUDGET

A Budget Type Which Include Of Spending Data Items. Expenditure Budgets May Be Drafted
As Fixed / Flexible Budgets. A Fixed Budget Is One Which Is Prepared Keeping In Mind One
Level Of Activity. It Is Defined As One Which Is Designed To Remain Unchanged Irrespective
Of The Level Of Activity Attained. In Contrast, Flexible Budget Is One Which Is Designed To
Change In Relation To The Level Of Activity Attained. Flexible Budgets Are Prepared Where
The Nature Of Business Is Such That It Is Difficult To Predict The Demand/Sale Of Goods.

MASTER BUDGET
The Overall Or Master Budget Summarizes The Other Functional Budgets.
Consolidating The Functional Budgets, An Income And Expenditure Budget And
Budgeted Balance Sheet Are Prepared. The Master Budget Is Usually A One-Year
Budget Expressing The Expected Asset Position And Capital And Liability
Positions For The Projected Year.