Different Types Of Budgeting

Budget

A budget is a plan for a person or company expenditures. Budget involves looking at ones revenue or income and matching that to expenses such that the person or company pays for all necessary expenses.

Budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues quantities, cost and expenses, assets, liabilities and cash flow. In the business unit it expresses strategic plans of organisation activity or events in measurable terms. For the civil society the international budget partner regularly monitors global budget information.

Objective and function of budgeting

An effective budgeting system is vital to the success of a business firm. Budgeting is needed in organisation

Operating budgets are completed in advance of the accounting period, which is why they require estimated expenses and revenues.

The two types of budget are: the operating budget and capital budget. The operating budget is used to keep track of maintenance operations, salaries, and interest payments.

The operating budget relate to the physical activity/operation of the firm such as sales, production, purchase, debtor collection and creditors payment schedule, selling expenses, direct labour budget, manufacture expenses and administration expenses in specific terms an operating budget has the components mentioned above.

Administration expenses budgets

Administrative expenses refer to the costs of operating a business that are not directly attributable to the production of goods or services. Administrative expenses are related to the organization as a whole as opposed to the individual departments.

Administrative expenses are necessary costs that are associated with the management, administrative, clerical, and general functions within an organization. Administrative expenses can take the form of such basic needs as rent of the building, the cost of utilities, or the salaries of employees that are not involved in the production of goods or supply of

Charges for heating, cooling, power, and water are all usually classified as administrative expenses. The costs for internet, landline and mobile telephone services are also included in these expenses.

The cost of leasing or renting space for the operations of the organization is also a common example of administrative expenses. This can include rental cost of a suite of offices in an office building, or the rental of manufacturing plant. In some cases it might be successfully argued that the rental cost of production facility should be attributed to the production costs of goods.

Salaries of certain employees can also be included in the administrative expenses. The salaries of managers and general administrators, who are involved many different areas of the operations, can be included in administrative expenses. The directors’ remuneration and salaries of senior executives can also be included. Office rent office supplies and miscellaneous expenses also included in the administration