Knowing some best budgeting methodologies:

                As we all knows that very well, budget is a master print of a department vision for which they plan according to their vision for the future operations and that is also called the comprehensive road map towards to the profit plan. Like in short words the budgets shows that what an organization thinking about the complete market seniors and their future efforts to achieve the best possible outcomes form that specific market in which they are putting their all possible  efforts to achieve the organizational strategic objectives.

When the Operating and Financial plans to gather for a special cause the budget takes place. Every budget is consist of small activates and these activities are more further divided in other activities these leads the business to plane a budget for its use in future time period.

                Operating budget is an example of it the budget is emphasis on sales budget, production budget, direct material budget, direct labor budget, manufacturing budget, Ending finished goods inventory budget, CGS budget and Non-manufacturing budget that is further divide in R&D budget, Design and Marketing budget, distribution budget, Cost supervisor and administrative budgets the other one is pro forma income statement budget. Same like it the financial budget is consist of capital budget, projected budget, projected cash collection schedule, cash budget, pro forma balance sheet and preform statement of cash follows.

1   When there are many activities contact to a main activity that is called the project budget. That project is divided in design, engineering, production, marketing, accounting and HR. Like this example:

·         Zee Services budget department make their budget on each quarter basis and they consider each quarter a project and for each project function (Design, Engineering, Production, Marketing, Accounting and Human Resources).

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       The Budgeting method which is here going for discussion purpose or presentation for making your conceptual approach is known as  “Activity Based Budgeting – ABB” in which the costing is applied. In this methodology the each activity. ABB is a method of budgeting designed to provide greater transparency in to the budget process.

·         ABB is a method of budgeting designed to provide greater transparency in to the budget process.

·         Empower greater local planning & accountability.

·         More efficient to use units & manufacturing activities.

·         Set priorities & develop new activities consistent with the overall mission & strategic goals of the institution.

·         The numerical example of the ABB is as follows:

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     Next popular method for the  budgeting is the “Zero based budgeting method” in which all the expenses are justified for each new period. The management makes the new budget for every period they are not focusing on the previous points and not giving the value to those points in different periods and their amounts also. 

• ·         According to this method the management have the advantage they are putting the less efforts to make and review the changes in the budget, they just need to make the new budget for the concerned period of time so that reduce their changes review and data analysis efforts.
• ·         Every year the efforts form the zero base and making the new budget allows the managers to put their efforts in respect of all the expenditures regardless the various changes from the previous year.
• ·         Managers put their weightage to achieve the cost – benefits.

The “Continuous Rolling method” is a method in which the prepared budgets of the previous periods is revised on continuous basis.

The advantage of this type budget is that the managers think for future time, but the disadvantage is that they mostly doing efforts for budge preparations. For example.

 “Static Budget” is another method of budgeting in which the management always follow the level of sales and production. The results of this type of budge is based on variance and the variance can be Favorable or Unfavorable.

The is also another type of method for budgeting which is known a “flexible budgeting” that based on various type of activities and at the end of each period of time the management compare their actual performance for that period of time with the appropriate budgeted level.

Examples for both the Static Budgeting and Flexible Budgeting are as follows.

That’s are the some of the different famous methods and techniques which are very popular among the financial managers and they use them to prepare their budgets. The mostly concepts of this article or discussion topic has been taken form the “Gleim CMA-USA Part-1 5^th edition“ book after reading the passages. That Gleim book is very helpful for the Students of CMA-USA and providing them helps to achieve the efficiency in management accountancy.