Budget

Financial Planning & Budgeting

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Budget

A budget is a detailed proposal for the future that is usually expressed in formal
quantitative terms. Individuals sometimes generate household budgets that balance their
income and expenditures for food, clothing, housing, and so on while providing for some
savings. Once the budget is established, actual spending is compared to the budget to
make sure the plan is being monitored. Companies use budgets in a similar way,
although the amount of work and core details far exceed a personal budget.

Master Budget – is a comprehensive budget that consolidates the overall plan of the
organization for a specific period.

The master budget is primarily composed of:

(1) operating budgets and

(2) financial budgets. The master budget, in some organizations, is also referred to as
pro forma budget, planning budget, forecast budget, master profit plan.
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Terminologies:

FIXED BUDGET
A budget equipped for one level of activity within a certain period. (Other term: static
budget)

FLEXIBLE BUDGET

A budget organized for different levels of activity within a certain period. (Other terms:
variable budget, sliding scale budget)

CONTINUOUS BUDGET

A 12-month budget that rolls forward one month as the current month is accomplished
(other term: perpetual budget)

ZERO-BASED BUDGETING
A procedure wherein budgets are prepared by top management with little or no inputs
from operating personnel