To start or run any business, budget plays a significant role. You can’t move ahead before determining your budget. Isn’t it? No doubt, budgeting is a part of any business regardless the size and type right. With proper budget, your business can identify by setting you goals and objectives. However, the main concern here is to know about the budget properly and types of it. So in this article, we’re going to take a closer look into the common types of budget in accounting industry.
Without beating around the bush, let’s talk about the types of budget below.
Types of budget in accounting with a brief look
Just read out the given different types of budget in accounting and master your business finance:
1. Master budget
The first type of budget in comes in the list is master budget. It is a set of financial and operating budgets for a specific accounting period. This type of budget is used for fiscal year. You can prepare this budget quarterly or annually. Based on the size and type of business, master budget varies.
2. Financial budget
This type of budget refers to the budget for the balance sheet elements. With financial budgeting, you easily get to see recorded assets, liabilities, and stock holder equity.
3. Operating budget
Simply putting, operating budget records the income statement elements like revenue and expenses. Let me tell you that operating budget has other minor budgets included like sales, production, production cost, overheads, etc. You can easily manage the cost of operation in the office. Otherwise, hiring accounting services in Honolulu should be your go-to option.
4. Cash budget
Next type of we have in the list is cash budget. It is the process of determining the expected cash inflows and outflows for the relevant period of time. It also expands into 4 categories, which are – receipts, disbursements, cash surplus or deficit, and financing as well.
5. Flexible budget
As the term suggest, flexible budget is dynamic in nature which keeps on changing based on company’s recurring expenses. You can adjust this budget to the actual activity of the company. How much money you’re investing in business will be determined by flexible budget. Moreover, you can prepare this budget on excel sheet as well. Your company’s flexible budget should match expenses to specific revenue levels or activity levels as well. For example, the utility cost must correlate to the number of machines that are in operating.
6. Static budget
Another name for static budget is fixed budget, which means it will be determined on expected capacity level. Since this is fixed, only stable companies use it. If you’re a departmental store with operations then this type of budget is for you.
7. Program budget
This type of budget rightly says the budget determined for a specific program or activity. The programs include research, development, training, marketing, engineering, public relations and many more. This type of budget is basically generated for product lines. Let me tell you that you can’t use this budget for control purposes.
8. Zero-based budgeting
Do you want to determine the outcome of management expenditure invested to support that outcome? If that’s so, then zero-based budgeting is for you. All you have to do is combine various outcome expenditure packages creating a budget which will result in specific set of outcomes for your company.
9. Capital expenditure budget
This type of budget refers to the budget for expected investment in capital assets and long-term projects. You can prepare this budget for minimum 3 years and maximum for 10 years. The capital assets include purchase of fixed assets like building, machinery, plants, lands, and equipment. Moreover, long term projects are designed to develop new products, expand existing product lines, and reduce costs.
Wrapping up
You have come to the end of this article guys. I hope you found this article informative and helpful in understanding the types of budget. Now you can say that all of these budgets are a part of a company’s overall financial planning. Based on your short-term and long-term planning, you can determine the budget for your company. If you’re concerned about business budgeting, Kayabooks is here to help. We’ll help you choose the best plan budgeting plan for you.
Just get in touch with us here.