. ‡ So budget is prepared annually to estimate and control the activities of a company for its next financial period.MEANING OF BUDGET ‡ A budget is simply a financial forecast for a future period.

Budgets result from forward thinking and planning. ³ Budgets are finished products« they are formal programs of future operations and expected results. ³A budget is a predetermined statement of management policy during a given period which provides a standard for comparison with the results annually achieved. It also helps the management to perform 3 functions of management i.´ So budget serve as a guide to the conduct of operations and a basis for evaluating actual results.e. Wylie.´ According to Brown and Howard. co-ordinating and controlling.DEFINITION OF BUDGET According Harry L. planning. .

‡ To bring about co-ordination between different activities of an enterprises. . ‡ To incorporate the measures of calculations of deviations from budgeted results and thereby taking controlling measures. ‡ To ensure that actions are taken in accordance with the target and if required to take suitable corrective actions. labour etc. which is necessary for the success of an organisation. ‡ To run the production activities in efficient manner by reducing problems like lack of raw materials. ‡ To predict short term and long term financial positions for better financial positions and management of working capital in better manner.OBJECTIVES OF BUDGET ‡ To control the cost and increase the revenue and thereby maximise the profit.

productive capacity and requirement of inventories etc. . ‡ Research and Development budget: It provides estimate of expenditure for the improvement in the quantity of the products through research and development for new products.TYPES OF BUDGET ‡ Sales budget: It is a forecast of total sales classified according to group of products that are expected to be sold in what quantity and at what prices. ‡ Production Budget: It is a forecast of budgeted production based on sales. direct labour cost and other overheads. ‡ Production cost budget: It is a budget of cost of production including direct material cost.

‡ Long term budget: Such budgets are prepared with a long term view. It represents the overall plan of the enterprise & therefore called as the principal planning budget. . ‡ Capital Budget: It is a forecast of outlay on fixed assets as also of the sources of capital required. ‡ Master Budget: A master budget is a summary budget for the entire enterprise. The major objective of the cash budget is to plan cash in such a way that the company always maintains sufficient cash balance to meet its needs. It is the co-ordinated and summarised budget of the entire budgetary programs.TYPES OF BUDGET ‡ Cash budget: It is one of the important budget. They are concerned with planning the operations of a firm over five to ten years.

‡ Current budget: Such budgets are prepared for a very short period for example one month. ‡ Capital budget: These are related to the capital structure and liquidity of the enterprise. .TYPES OF BUDGET ‡ Short term budget: Such budget is prepared for a period of one or two years. one quarter. or a season. It relates to the entire operations of the firm. ‡ Operating budget: It is also known as revenue budget or income and expenses budget.

.TYPES OF BUDGET ‡ Fixed budget: It is a budget in which targets for the coming year prepared well in advance some times even two to three months before the year. Such a budget shows the expected behaviour of cost at various levels of production. ‡ Personnel budget: It is a budget of personnel inventory. hence it would automatically include labour employed in functional units of a business enterprise. ‡ Flexible budget: It is also known as a variable budget.


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