Article | Budgetary System

Budget is a quantitative financial statement that contains expected expenditure and estimated revenue for a given period usually one year.
A Budgetary system comprises budgetary planning and control.
- Budgetary planning is all about the process involved in the preparation of budget.
- Budgetary Control compares budget prepared with the actual performance or result and the objectives of identifying any possible variance(es) so as to take corrective actions or steps.

Types of Budget:
- Functional or Operational Budget: is a budget for day to day operations. It consist of the following:
        - Sales or revenue Budget
        - Production or operation budget
        - Material Budget
        - Labour budget
        - Overhead budget

- Financial or master budget: is a comprehensive budget that covers the entire aspect of an organization. It consist of the following :
        - Projected or Budgeted profit and loss statement
        - Balance sheet
        - Cash budget: statement of budgeted expenditure and cash revenue that will come inform of cash in a given period of time. The objective is to avoid cash surplus and shortage.

- Capital Budget: is a budget for long term project and objective is to appraise the worthiness of long term projects..