Different types of Budget

Different types of budgets have been developed keeping in view their necessity. Budget can be classified on the basis of coverage, capacity, condition and period.

Types of Budget

 Functional Budget

Functional budget is a budget which relates to any of the functions of any under takings, e.g., sales, production, research and development, etc. commonly used functional budgets are-

i.                    Sales budget,

ii.                  Production budget,

a.      Raw material budget,

b.      Labor budget,

c.       Plan utilization budget,

d.      Overhead budget.

iii.                Purchase budget,

iv.                Capital expenditure budget,

v.                  Administration budget,

vi.                Cost budget,

vii.              Research and development budget.

Sales budget

The sales budget is the foundation upon which the other functional budgets are prepared. So, sales budget being the principal factor and is the most important budget and forms the basis on which all other budgets are prepared. I brief, sales budget is the statement of planned sales in terms of quantity and value and analyzed byproducts.

For forecasting sales, it is necessary to consider the following factors:

a.      Historical analysis of sales,

b.      Market analysis,

c.       Salesman’s estimates,

d.      General trade and business conditions,

e.      Report of salesman,

f.        Special conditions,

g.      Seasonal fluctuations,

h.      Financial aspects,

i.        Adequate return on capital employed,

j.        Competition,

k.      Planned capacity,

l.        Sales promotions,

m.   Customers’ tastes,

n.      Policy of the concern,

o.      Government intervention,

p.      Government policy regarding export and import,

q.      Product profitability,

r.       Tax policy.