It is more a matter of fund reallocation.
Also, in both cases, the budget for one year should be considered as
an entirely different tool compared to that of the previous year. This is
because the economic, social, and political environments change, they
create new conditions and circumstances, which determine the need for a
different budget design.
Whether we refer to governmental or corporate situations, the budget,
once developed, must be consulted daily, or as often as the situation
requires it. In case the budget is not intensely monitored, it because a
slightly useless tool.
One of the most important traits that the two types of budget have in
common is represented by the fact that the budget must be a realistic
representation of the situation, its opportunities and threats (UCLA,
2009). If the organization in case builds a budget that presents an
optimistic variant, even if it may sound better, it would not help any of
the parties involved.
Types of Budget
The most important types of budgets in the case of private operators
include: sales budget, production budget, cash flow budget, marketing
budget, project budget, revenue budget, and expenditure budget (Bowles,
2009). The sales budget is intended to estimate the company's sales for a
given future period of time. It is estimated in both units and dollars,
most of the time, in order Based on this budget, the company is able to
determine its sales targets.
The production budget is characteristic for the companies that are
specialized on production. Following the sales budget, the production
budget estimates the number of units that the company must produce in order
to meet the sales targets. However, the most important feature of this type
of budget is represented by the fact that it estimates the cost for each
produced unit.
The cash flow budget is one of the most important types of budget. It
reflects the estimated future cash revenues and expenses (Harvard, 2007).
Such a budget type is not designed for medium or long periods of time,
given the imminent cash flow fluctuations.
The marketing budget obviously is designed in order to forecast
expenses used in promoting, advertising, and generally marketing the
product or...
The project budget only applies in the case of
a specific project. Its purpose is to determine expenses with the workforce
and material resources.
The revenue budget is characteristic for the governmental budget, as
it reflects the level of revenues the government is likely to benefit from
over one fiscal year. This budget also determines the expenditures covered
by the mentioned revenues. The expenditure budget reflects the forecasted
units that the company or government is expected to acquire.
There are several other types of budget in accordance with their
purpose or timeframe, like: business set up budget, capital budgeting, zero
based budgeting, partial budgeting, performance based budgeting,
incremental budgeting (EconomyWatch, 2009).
Reference list:
1. Four Principles for the Federal Budget (2009). Involved
Voters. Retrieved October 16, 2009 from
http://involvedvoters.blogspot.com/2009/03/four-principles-for-
federal-budget.html.
2. Budgeting (2001). CIVICUS: World Alliance for Citizen
Participation. Retrieved October 16, 2009 from
http://www.civicus.org/new/media/Budgeting.pdf.
3. Bowles, Marc (2009). Budget Types. The Institute for Working
Futures. Retrieved October 17, 2009 from
http://www.marcbowles.com/courses/advdip/module7/chapter1/amc7
ch1two.htm.
4. Types of Budget (2009). EconomyWatch. Retrieved October 17,
2009 from http://www.economywatch.com/budget/types/.
5. Budget categories (2007). Harvard Business School Publishing.
Retrieved October 17, 2009 from
http://www.cimaglobal.com/cps/files/harvard/budgeting/budgetca
tegories.html.
6. Thompson, Charles (2009). Lawmaker wants to punish decision-
makers for budget delays. The Patriot News. Retrieved October
17, 2009 from
http://www.pennlive.com/midstate/index.ssf/2009/05/lawmakerwan
tstopunishdecis.html.
7. Principles of Financial Management (2009). UCLA Corporate
Accounting. Retrieved October 17, 2009 from
http://www.accounting.ucla.edu/fnmgmt.asp.
8. Andrews, B. (2007). Two Guiding Principles for Effective
Budgeting. Fieldstone Alliance. Retrieved October 17, 2009
from
http://www.fieldstonealliance.org/client/toolsyoucanuse/12-
19-07budgetingprinciples.cfm.
