Budgets

Wednesday, March 9, 2011

A budget is a statement of expected result expressed in numerical terms. Budgets serve as a mechanism. According to Louis A. Allen, “A budget is an estimate for use. In its most common from, it is an appraisal of expected expense projected against anticipated income for a future period. Budgets may be stated in time, money, materials, or other units required performing work and accomplishing specified results”.

Budgets may include in their scope any all aspects of business. Here are various types of budget such as production budget, sales budget, cash budget, advertising budget, etc. A budget may be fixed or flexible. A fixed budget is one which is prepared for a given level of activity. Fixed budget does not provide for cost changes due to variations in output. A flexible budget, on the other hand, consists of a series of budgets for different levels of activity. Therefore, it varies with the level of activity attained.