Types of budget and budgetary system explained
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Budget is a amount /cost planed for a time duration .Thus this time duration is the most important factor in budget and it provides the plan in terms of cost which is the value of economic resources. It is a balanced plan of cost and achieve the objectives and aims in specific time period.
As we know budget is a very common term that's used in or day today life. It may be related to business, personal or any part of work were there is use of cash.
The main characteristics of budget are:
1. Budget is prepared prior to the specified period.
2. Its a comprehensive plan of the enterprise endeavors to achieve.
3. Budget is prepared for a specific period or time duration.
4. A advance step and refers to the future course of action.
5. It indicates the business policy that needs to be followed in order to achieve a given objective.
6. Budget is a statement in terms of money/quality or both.
7. It provides some measuring estimation to compare with.
8. A well organised plan to achieve the objectives.
With this characteristics budget also carry certain objective.
Objectives of a budget are :
1. Diverts the attention of all concerned to the attainment of a common goal.
2. Aims on perfect control over the cost and performance carried under.
3. Contributes to coordinated effort of all departments in order to achieve the goal.
4. As budget are compared with actual performance and variance, disclosing the weakness of organization. Which certainly helps in taking remedial measures.
5. Budget mainly aims in conducting and planning the process in given limitations(cash/time/resources).
Budget can be classified differently and categories accordingly.
1. Function based.
2. Time based.
3. Flexibility based.
Function based includes
1. Purchase/sales budget
2. Production cost budget
3. Research budget
4. Cash budget
5. Capital budget
6. Master budget
7. Capital expenditure budget
8. Personal budget
Flexibility based includes
1. Flexible budget
2. Fixed budget
Time based includes
1. Short term budget
2. Long term budget
3. Current budget
4. Progressives budget
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