Question

Briefly discuss four types of organizational budgets

Answer 1

Budget is a predefined planning for various components like sales volume, revenues, purchases, costs, expenses etc for a fixed period of time.
Budget helps the organisation to achieve its goals effectively and efficiently. It also helps in guiding and regulating activities with the view of attaining a predefined objectives.
There are various types of budgets in an organisation.

The four types of organisational budgets are :-

1. Physical budgets :- these are the budgets which contain the information about the physical quantity/unit about sales, production etc. This budget helps in keeping a track on inventory level whether it is a raw material inventory or finished goods inventory. Example : quantity of sales budget, quantity of production budget, manpower budget etc.
2. Cost budgets :- these are those types of budgets which provides the information about various costs in respect of manufacturing, sales, administration etc. These budgets helps in ascertaining various costs and proper allocation of cost is done using these types of budgets. Example manufacturing cost budget, selling cost budget etc.
3. Financial budgets :- are the budgets which keeps a track on the finance of the organisation. These budgets facilitates in ascertaining the financial position of the concern. These budgets helps in ascertaining various sources of finance weather cash inflows or cash outflows.Example : cash budget, capital expenditure budget etc.
4. Profit budgets :- these are the budgets which helps the organisation in asserting the profits. These budgets are used in tracking various sources of income.Example : sales budget, profit and loss budget etc.