CLASSIFICATION OF BUDGETS

ACCORDING TO ACCORDING TO ACCORDING TO

TIME FLEXIBILITY FUNCTION
1. Long term 1. Fixed budget 1.Master Budget
2. Short term budget 2. Flexible budget 2.Functional budget

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Master and Functional
budgets
 Master budgets

 A master budget is prepared for the entire

organization incorporating the budget of different
functions.
 For example when we refer to the master budget
of organization, it incorporates the budget outlays
of different department and units.
 In the business organizations, the maser budget
incorporates various functions and units and their
outlays.

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 Functional budgets

 A functional budget is prepared incorporating a

major function and its sub- functions.

 Since an organization may have a number of

functions, numerous functional budgets are
prepared.

 E.g.. Production budget, sales budget ,marketing

budget in an organization.

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LONG TERM AND SHORT-TERM
BUDGETS
 LONG TERM
 Many organizations integrate their yearly budgets
with long-term projections of business activities
and along with yearly budgets; they prepare
budgets for a longer period of 2 – 3 years.

 When one budget period is over, budgets are

prepared for the next year and subsequent 2 -3
years.
 SHORT TERM
 The short term budget is for a year and is divided
into a number of periods for effective
implementation.

 For e.g.. Cash budgets are on yearly basis as well

as on monthly or quarterly basis to facilitate better
cash management.
FIXED AND FLEXIBLE BUDGETS
 FIXED BUDGETS

 This is defined as a budget which is

designed to remain unchanged irrespective
of the volume of output or turnover attained.

 When an organization’s volume of business can

be predicted with fair amount of precision, the
fixed budget is satisfactory
 FLEXIBLE BUDGETS
 A budget which is designed to change in
accordance with the activities of the
organization is known as flexible budget.