Classification of Budget

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Budgets can be classified on the basis of different factors as below –

1)      On the basis of Subject matter :-

a)      Capital Budget: Capital budgets are  concerning with assets and liabilities of the business and are incorporated into the budgeted balance sheet for the fiscal year. These budgets deal with the assets and capital funds of the hotel. Budget for plant, equipment, cash and stocks etc. are, therefore, capital budgets. It reflects the long term business policies.

b)      Operating Budget/ Operational Budget:These are concerned with income, expenses and profits and may be divided into the different operational sectors like sales, purchase, Office administration, Labour/HR, Maintenance etc. Budgets are prepared for the various revenue producing departments. Some of the examples are –Purchase Budget, Sales Budget, Labour Cost Budget, Office Expenses Budget etc. It reflects the short term business policies.

2)      On the basis of Scope/ sections:-

a)      Master Budget

i)        Income-expenditure Budget/ Profit & Loss Budget.

ii)      Assets-Liabilities Budget/ balance sheet Budget.

b)      Departmental Budget / Functional Budget. It is in respect of single department or function of the operation.

i)        Banquet Budget;

ii)      Sales Budget;

iii)    Purchase Budget;

iv)    Operating Budget.

3)      On the basis of behaviour

a)      Fixed Budget: a Budget which is independent on the level of turnover is known as fixed Budget. It is based on one set of conditions, one volume of output, and simple collection of costs such as-

i)        Advertising Budget,

ii)      Office Administration Budget,

iii)    Maintenance Budget.

b)      Flexible Budget: A Budget which provides for several possible levels of turnovers and predetermines costs or cash flows is known as flexible Budget. It contains different estimates in different assumed circumstances. For examples- labour cost Budget in a resort hotel.

WordPress Tags: Flexible Budget, Functional Budget, Master Budget, Operational Budget, Capital Budget, Budget, Capital, turnover, policies.

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3 responses to “Classification of Budget

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  2. This classification seems quite basic, we often think on the limited sides. Your posts are interesting. Thank you.

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