TYPES OF BUDGET

1. TYPES OF BUDGET
AYUSHI GUPTA
M.COM 1SEM
MANAGEMENT
ACCOUNTING

2. CONTENT
• INTRODUCTION
• TYPES OF BUDGET
TIME
FUNCTION
FLEXIBILITY
• CONCLUSION

3. INTRODUCTION
BUDGETS:-AN ESTIMATE OF FUTURE NEEDS
ARRANGED TO ORDERLY BASIS COVERING ALL OR SOME
ASPECTS OF THE ACTIVITIES OF AN ENTERPRISE FOR
THE DEFINITE PERIOD OF TIME.
BUDGETING:- THE PROCESS OF PREPARING
BUDGET.

4. TYPES OF BUDGETS
TYPES OF BUDGET
TIME
SHORT
TERM
LONG
TERM
CURRENT
FUNCTION
MASTER
SUBSIDIAR
Y
SALES
PRODUCTI
ON
COST
PRODUCTI
ON
COST
OTHER
FINANCIAL
CASH
CAPITAL
EXPENDITU
RE
FLEXIBILITY
FIXED FLEXIBLE

5. TIME
LONG TERM:- SYSTEMATIC AND FORMULIZED PROCESS
FOR DIRECTING AND CONTROLLING FUTURE OPERATION
TOWARDS DESIRED OBJECTIVE.
- 5 TO 10 YEAR.
-IN PHYSICAL QUANTITIES.
-RELATED TO IMPORTANT AND MAJOR ITEMS
SHORT TERM:- -PREPARED FOR 3,6 OR 12 MONTHS
USUALLY FOR 1 OR 2 YEAR.
-SUPPLEMENTARY TO LONG TERM
-PREPARED IN DETAIL
-EXAMPLE- CASH BUDGET

6. TIME
• CURRENT:- PREPARED FOR CURRENT ACTIVITIES.
-IT IS THE BUDGET FOR CURRENT FINANCIAL YEAR.
- ONLY FOR ONE YEAR.

7. FUNCTION
• MASTER BUDGET:- - IT IS THE SUMMARY OF ALL
FUNCTIONAL BUDGETS.
-TO INCORPORATE FUNCTIONAL BUDGET.
-APPROVED BY TOP MANAGEMENT.
-SHOWS THAT BUDGETS ARE INTERLOCKED.

8. FUNCTION
• SUBSIDIARY BUDGETS:- -KNOWN AS OPERATING OR
FUNCTIONAL BUDGET.
-IDENTIFY THE KEY FACTORS AND PREPARE THE
PRINCIPAL BUDGET.
-OTHER BUDGETS PREPARED ON THE BASIS OF PRINCIPAL
BUDGET.
SALES BUDGET:- - EXPRESSES THE ESTIMATES OF
QUANTITIES AND VALUES OF SALEABLE ITEMS.
-KEY POINT
-SHOULD BE PREPARE ACCURATELY
-CAN BE PREPARED:- PRODUCT WISE; TERRITORY WISE;
CUSTOMER WISE; PERIOD WISE.
-

9. FACTORS:- 1-PAST SALES; 2-KEY FACTOR; 3-MARKET
CONDITION; 4-PRODUCTION CAPACITY; 5-TYPES OF PRODUCT; 6-
COMPANY OBJECTIVES; 7-CUSTOMER ETC.
PRODUCTION BUDGET:-
-BASED ON SALES BUDGET.
-SPECIFIES THE THE NO. OF UNITS TO SATISFY THE SALES
FORECAST AND TO ACHIEVE DESIRED LEVEL OF CLOSING FINISHED
GOODS.
-AIM :-TO MANUFACTURE THE VOLUME OF GOODS REQUIRE AT
MINIMUM POSSIBLE COST.
FACTORS:- 1-PRODUCTION SHOULD BE ACCORDING TO
THE REQUIREMENT OF SALES BUDGET.
2- WASTAGE MUST BE CONTROLLED.
3-PLANT CAPACITY. 4-MATERIAL, LABOR POWER, AND OTHER
FACILITIES SHOULD BE AVAILABLE.

10. COST BUDGET:- IT INCLUDES TWO TYPES OF BUDGETS:-
 PRODUCTION COST BUDGET:-
1-DIRECT MATERIAL COST BUDGET
2-MANUFACTURING OVERHEAD BUDGET
3-DIRECT LABOR COST BUDGET
 OTHER COST BUDGET:-
1-ADMINISTRATION COST BUDGET
2-SELLING AND DISTRIBUTION COST BUDGET
3-RESEARCH AND DEVELOPMENT COST BUDGET

11. FINANCIAL BUDGET:-
 CASH BUDGET:- IT IS A DETAILED ESTIMATE OF INFLOW AMD
OUTFLOW OF CASH FOR FUTURE PERIOD OF TIME .
- PREPARED ON MONTHLY WEEKLY HALF YEARLY BASIS.
-CASH RECEIPTS AND PAYMENT ARE ANALYZED.
-BORROWING AND INVESTMENT DECISIONS ARE TAKEN.
 CAPITAL EXPENDITURE BUDGET:- IT SHOWS THE LIST OF
CAPITAL PROJECTS WITH THEIR COSTS.
-BASED ON REQUISITES FOR CAPITAL EXPENDITURE FROM
VARIOUS DEPARTMENTS.
-CONSIDERING THEIR PROFITABILITY.

12. FLEXIBILITY
• FIXED BUDGET:- ALSO KNOWN AS STATIC BUDGET.
-DESIGNED TO UNCHANGED ( VOLUME OR TURNOVER)
-CASES:- WHEN THE SALES ARE NOT AFFECTED.
-SALES DEPENDS ON SEASONAL FACTORS
-NEW PRODUCT INTRODUCED
• FLEXIBLE BUDGET:-
-IT IS DESIGNED TO CHANGE WITH LEVEL OF ACTIVITY.

13. -CONCEDERS VARIOUS LEVEL OF ACTIVITIES.
-CATEGORIZING THE EXPENSES AS:- 1-FIXED; 2- SEMI-
VARIABLE; 3-VARIABLE.
-ESTIMATED PROFIT TARGET CAN BE IDENTIFIED.
-ACTUAL PERFORMANCE CAN BE COMPARED WITH STANDARD
PERFORMANCE.
-CASES:-WHEN THE LEVEL OF ACTIVITY VARIES.
-SALES AFFECTED BY FASHION
-COMPANY FREQUENTLY PRODUCE NEW PRODUCTS.

14. CONCLUSION