Flexible Budget and Fixed Budget

2. What Is Budget?

3. Definition:
A budget is a formal statement of
estimated income and expenses based on
future plans and objectives. In other
words, a budget is a document that
management makes to estimate
the revenues and expenses for an
upcoming period based on their goals for
the business.

4. What Does A Budget Mean?
There are tons of different kinds of
budgets from short-term and long-term to
department specific. Management can make
a budget for anything. The important thing
to remember is these budgets are really just
the management’s future goals and plans for
the business written down in financial form.

5. What Is A Sales Budget?
A sales budget is management's
estimate of sales for a future financial
period. A business uses sales budgets to set
department goals, estimate earnings and
forecast production requirements. The
sales budget affects both other operating
budgets and the overall master budget of
the company.

6. What Is Purchase Budget?
A purchases budget report allows
business owners to determine how much
money and goods are needed to reach
desired goals. This particular budget is used
for companies that have products in stock
or inventory, as the value of inventory
plays a large role in a complete purchases
budget.

7. What Is Flexible Budget?
A flexible budget, also called a variable budget, is
financial plan of estimated revenues and expenses based
on the current actual amount of output.
In other words, a flexible budget uses
the revenues and expenses produced in the current
production as a baseline and estimates how the revenues
and expenses will change based on changes in the
output. This is why it’s often called a variable budget.
Management often uses flexible budgets before a period
to predict both a best case and worse case scenario for
the upcoming accounting period.

8. What Is Production Budget?
The production budget contains details
of the number of units that are intended to
be produced by a business in a particular
period. This budget is made after the
preparation of the sales budget. It helps a
company to plan its manufacturing
schedule and ensure that it produces an
adequate quantity of goods.