Core concepts
- 01Budget: financial/quantitative plan for a defined period.
- 02Types: functional (sales, production, cash), master budget (consolidates), fixed vs flexible.
- 03Zero-based budgeting (ZBB): each expense justified from scratch.
- 04Performance budgeting: links inputs to outputs.
- 05Budget Manual documents procedures; Budget Committee approves.
Flowchart summary
Budget Hierarchy Sales Budget --> Production Budget --> Material/Labour/OH Budgets | Cash Budget + Capital Expenditure Budget | Master Budget (P&L + BS forecast)
Exam-critical pointers
- ⭐Principal/Key Budget Factor: most binding (often sales, sometimes raw material/capacity).
- ⭐Rolling budget: continuously updated (add new month, drop oldest).
- ⭐Performance reports compare actual with budget — feedback control.
- ⭐Behavioural aspects: participation, slack, dysfunctional behaviour.
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