Annual (Master) Budgets
- Comprehensive plan for entire organization, typically 1 year
- Components: operating budget, financial budget, supporting schedules
- Developed top-down or bottom-up; integrates all departments
- Benefits: clear targets, coordination, performance evaluation
- Limitations: inflexible, time-consuming, may become outdated
Project Budgeting
- Focused on specific projects or initiatives, time frame varies by project
- Components: direct costs, indirect costs, contingency reserves
- Developed by estimating resources and costs for project tasks
- Benefits: detailed control, aligns resources with objectives
- Limitations: difficult for uncertain projects, may miss indirect impacts
Activity-Based Budgeting (ABB)
- Budgets based on activities driving costs, not just line items
- Components: activities, cost drivers, resource requirements
- Developed by identifying activities, estimating demand, assigning costs
- Benefits: more accurate cost allocation, highlights inefficiencies
- Limitations: complex to implement, data-intensive
Zero-Based Budgeting (ZBB)
- Every budget cycle starts from zero; all expenses must be justified
- Components: decision packages, ranking of activities, resource allocation
- Developed by evaluating and justifying each activity/expense
- Benefits: eliminates waste, aligns spending with goals
- Limitations: time-consuming, may overlook long-term needs
Continuous (Rolling) Budgets
- Budget updated regularly (e.g., monthly/quarterly), always covers set future period
- Components: same as master budget, but period shifts forward
- Developed by revising and extending budget as time passes
- Benefits: up-to-date, responsive to changes
- Limitations: requires ongoing effort, may cause planning fatigue
Flexible Budgeting
- Adjusts budgeted costs for actual activity levels
- Components: variable costs, fixed costs, activity measures
- Developed by defining cost behavior and applying to actual output
- Benefits: better performance evaluation, adapts to volume changes
- Limitations: less useful for fixed costs, requires accurate cost classification
