(i) Master Budget : Master budget is the sum total of company's budget that includes allocation of funds to different activities of the business. It evaluates the cost centres within the organization and allocates funds by including different factors. The master budget is developed by including different factors like sales, working capital, operating expenses, income sources, etc.
(ii) Operating Budget : Operating budget of the business involves costs related to the operational activities. The costs include production cost, overhead cost, manufacturing cost, labour cost, administrative cost, working capital, etc. Operating budgets are prepared considering all the above factors. This budget can be weekly, monthly, quarterly or even yearly basis. The operating budget ensures that the managers known their scope of work in proportion to the amount of funds allocated to the department.
(iii) Financial Budget : The financial budget ensures that right types of funds are available whenever they are required. The aim of the budget is to manage the outflows with the inflows. The outflow is in the form of expenses and inflow is in the form of sales. Decisions like mergers and acquisitions depend on the financial budgets of the organizations.
(iv) Cash Flow Budget: Cash flow budget is more about managing the working capital of the business. The cash flow budget determines whether the accounts payable and accounts receivable are dealt timely. It ensures that the inflow of the cash is regular and timely. This budget is important as it helps the managers to determine the period of cash shortage and accordingly take necessary action towards it. Cash flow budget also enables the business to know whether it would be able to handle new projects efficiently or not.
(v) Static Budget : A static budget is one that remains the same even after the change in the factors that affect the budget preparation. A company that is seeing a constant drop or rise in sales may not change its budget allocation as it follows a static budget. Static budget presumes the input, output values of the future period and based on that allocation of resources is done. The result of the presumption of static budgets are very different from the actual outcome.