Type of Budgets.

Q66. Discuss various types of budget.
Ans. Type of budgets are:

  1. Fixed Budget: When a budget is prepared for a fixed level of output and it became ineffective as the level of output change is known as fixed budget.
  2. Flexible Budget: When budget is prepared by differentiating expenses in to fixed and variable in such a manner that it can be change for any level of output is known as flexible budget. If level of activity change, revised budget can be prepared.
  3. Functional Budget: Budget which relate to any function of the organization is functional budget. For example: Sales budget, production budget etc.
  4. Master Budget: It is a consolidated summary of various functional budgets. It serves as the basis upon which the budgeted profit and loss account and balance sheet are build-up.
  5. Long Term Budget: The budget which is prepared for a period more than one year is long term budget.
  6. Short Term Budget: Budget which is prepared for a period one years or less than one year is short term budget.
  7. Current Budget: A budget which is prepared for use over a short period of time is current budget.

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