Question

Shrewdly designed budgets assist businesses leaders with awareness of expenditures and managing resources. Businesses use a variety of budgets to measure their spending and develop effective strategies for maximizing their assets and revenues. Many types of organizational budgets exist and each have different purposes, strengths, and weaknesses.

Respond to the following in a minimum of 175 words:

• Briefly discuss four types of organizational budgets.

Answer 1

Budgets help organization track and manage their resources. They prepare a variety of budgets to measure their spending and develop effective strategies for maximizing their assets and revenues. Here are the four types of organizational budget:

1. Master Budget - A master budget is an aggregate of a company’s individual budgets designed to show a complete picture of its financial activity and health. The master budget includes factors like sales, operating expenses, assets and income streams to allow companies to establish goals and evaluate their overall performance, as well as the individual cost centers within the organization.

2. Sales Budget - A sales budget is a picture of expected total sales revenue and selling expenses of the business. It depicts what product will be sold, in what quantities, and at what rates.

3. Production Budget - Production budget depends on the sales budget. It is useful in determining the cost of production. The nature of production budget will differentiate from business to business.

4. Financial Budget - This budget shows the requirement  of equity for both long-term and short-term needs of the business at different points of time in future. An important item of the financial budget is the cash budget.