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What are some of the different types of budgets?

What are some of the different types of budgets? Describe in detail one type of budget covered in the text. Describe what the budget is used for and what information it provides a business.

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A budget is a plan and usually a detailed plan about the future. In business, there is much talk about strategy. Strategy and budgeting are part of the same process. Strategy is the overall plan to accomplish a goal whereas budgeting contains the details needed to quantify and qualify the strategy. The reputation of budgeting is that it is a number-crunching process, but budgets can be much broader in scope.

For example, a flexible budget might compare levels of production for products at various locations. Or a budget might be a timeline for future asset acquisition including equipment or even other companies. A budget might only show hours to get something done with no dollar amounts at all. A budget could be a policy statement about where a company is heading. Basically, a budget studies the allocation of resources for carrying out specific strategies or goals.

There is also a hierarchy of budgets. For example, cash flow budgeting is very common in most every business and all managers will understand the importance and the components of cash budgeting. Another example of a much used budget is in the forecasting of sales. Sales budgets are often the first budget to be prepared because many costs can be calculated based on sales.

Then there are the types of questions which budgets can answer. The following list shows the ...

Solution Summary

The solution of 907 words presents a list of types of budgets, an explanation of their uses, and the types of questions a budget can answer. A cash flow budget is examined in more detail.