Types of Budgets

Most organizations use a number of   different kinds of budgets-(1) financial;  (2) operating and (3) non- monetary

1. Financial budgets : Such budgets detail where the organization expects to get its cash for the coming time period and how it plans to spend it. Usual sources of cash include sales revenue, the sales of assets. the issuance of stock, and loans. On the other hand, the common uses of cash are to purchase new assets. pay expenses, repay debts, or pay dividends to shareholders. Financial budgets may be of the following types :

(2) Cash budget : This is simply a forecast of cash receipts and disbursements against which actual cash "experience" is measured. It provides an important control in an enterprise since it breaks down incoming and outgoing cash into monthly. weekly, or even daily periods so that the organization can make sure it is able to meet its current obligations. Cash budget also shows the availability of excess cash. thereby making it possible to plan for profit-making investment of surpluses.

(3) Capital expenditure budget : This type of financial budget concentrates on major assets such as a new plant. land or machinery. Organizations often acquire such assets by borrowing significant amounts through, say, long-term bonds or securities. All organizations. large or small, business or non-business, pay close attention to such budget because of the large investment usually associated with capital expenditure.

(4) The balance sheet budget : It forecasts what the organization's balance sheet will look like if all other budgets are met. Hence it serves the purpose of an overall control to ensure that other budgets mesh properly and yield results that are in the best interests of the organization. 2. Operating budgets : This type of budget is an expression of the organization's planned operations for a particular period. They are usually of the following types :

(a) The sales or revenue budget : It focuses on income the organization expects to receive from normal operations. It is important since it helps the manager understand what the future financial position of the organization will be.

(b) The expense budget : It outlines the anticipated expenses of the organization in an specified time period. It also points out upcoming expenses so that the manager can better prepare for them.

(c) The project budget : It focuses on anticipated differences between sales or revenues and expenses, i.e. profit. If the anticipated profit figure is too small, steps may be needed to increase the sales budget or cut the expense budget.