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.

Criticism of Budgets of Bangladesh

After the immediate declaration of budget of Bangladesh Government, it is usually noticed that the economists of Bangladesh come forward with their comments on published budget.

The followings are the usual points which are commented by the economists:

i.    Measures have been taken to maintain the rate of taxes at reasonable and flexible.

ii.   Tax collection procedure has been easier.

iii.  Attention has been given to protect the interest of the local industries in the case of indirect taxes.

iv.  Protection in the small industries has been given in such a way that will have survived our local industries. As a result, this will help to increase the establishment of backward linkage industries.

v.  Everyone appreciates the policy which gives the financial allowances for the old aged people, destitute, widows and divorced women.

vi. VAT policy, which is followed by the budget, is another new dimension to collect government revenue.

vii.  Increased allocation for the education sector and agriculture sectors is considered as a positive step for the developing country like Bangladesh.

viii. National budget addresses the stipend for female education, female illiteracy rate and results.

ix.     Tax exemption from the new materials of the industrial goods will be helpful for boosting exports.

x.  General consumers will be benefitted as a result of the exemption from all kinds of food grains and fertilizers for the boost up of agriculture sectors.

xi.     National budget also address the capital market and try to apply necessary steps to make it strengthen and as a result investment is encouraged for the potential investors.

xii.   The agriculture productivity will increase for providing subsidiary to the tune one TK 100 -300 crore in this sector.

xiii.  The growth rate of the budget is seemed to be ambitious, and set at 7%. But it will be challenging to attain.

xiv.   The previous budget were very big and we think that were not realistic.

Difficulties in preparation of a Budget

It is really difficult to prepare appropriate and accurate budget for the 3^rd world country. And Bangladesh is not exception at all. The difficulties of preparation of a budget are as follows:

i.  Data/ information which are collected from different offices, departments, organizations etc. are not similar in nature; rather contradictory.

ii.  There is wide difference between exits of expenditure and income of country.

iii.  Revenue collection measures of the government are not effective.

iv.    It is difficult to determine the priority of the development programs of the country.

v.      Excessive expenditure of the country.

vi. Difficult of industrial failure, faulty and irregular supply of electricity which disrupts the production and services, damages or any destruction makes a serious problem to prepare an effective budget.

vii.  It is absolutely difficult to minimize the target fixed and progress achieved.

viii.  Uncertainty of foreign aid, grants, and loan are the crucial problem in preparing budget.

ix.    High rate of inflation, manipulates the training and development activities.

Types of Budget

On the basis of income and expenditure budget is two, these are:

1.      Development budget

2.      Revenue budget

Development budget

Development budget is the annual development budget (ADP) of the government. It is taken up for current and future capital formation. Broadly speaking- development budget launched for mobilizing country’s resources, credits, sources of direct income, developing service sector for aiding the sources of indirect income, developing energy and agriculture sectors. Necessary funds for preparing development budget comes from revenue surplus, revenue, internal resources, loan, external debts and grants, remittances and foreign trade.

Revenue Budget

Revenue budget includes the financing of administrative machinery of the government, defense service, law and orders, Public health, education and other services, it is also called operation and maintenance budget of the government. To maintain the aforesaid recurring expenses, the government imposes different types of taxes for meeting expenses of this budget, some of which are direct expenses including excise duties

Why we need budget? / Significance/ importance of budget.

The necessity of preparation of budget by the government of Bangladesh is explained below:

i.    Budget is the statement of annual income and expenditure of the government.

ii.    Budget is a document of guideline of economic activities of the country.

iii.   Budget determines the area of all activities of the government.

iv.  It helps to adopt the financial planning for a particular period.

v.   Budget is also the reflection of the government development programs.

vi.Buddget also determines the priority of development programs.it is the prediction of development of a country.

vii.  Budget helps to determine costs estimation for unseen items.

viii.  Budget indicates the statement of accounts of service sectors.

ix.  It is the prediction of the development of the country.

x.     Budget indicates the sources of revenue collection of the government.

xi.  Budget is the controller of public income and expenditure.

National Budget

Budget is the idea or design for future prospects. A national budget is the process which helps in preparing accurate statement of income and expenditure of a country. Therefore budget of any country is the statement of total income and expenditure of the subsequent year calculated on the basis of economic activities of the total population. That is why budget of any country is not only the statement of domestic income and expenditure but also the lists of income received through domestic resources, external remittances as well as foreign trade. And at the same time expenditure incur4ed for subsequent year in the various sectors of economy.

What is budget and Budgeting/ Define: Budget & Budgeting

Budget is a matter of future action. It must be quantitative but not qualitative. So, it is a numerical blueprint of future action which is related with economical activities.

On the other hand, budget is a law relating to one country’s economic activity. It is an important part of a country’s constitution.

On the other hand, the act of preparing budget is called budgeting.