Performance Management Assignment 2 1

UNIVERSITY OF CENTRAL PUNJAB
ASSIGNMENT NO. 2
SUBMITTED BY RAMSHA ZAHID
REG NO L1F19BSAF0067
PROGRAM BS. ACCOUNTING & FINANCE
SECTION B
SUBMITTED TO SIR. MUHAMMED HUSSAIN
SUBMISSION DATE 13/12/2020
TYPES OF BUDGETING
1. Incremental budgeting: - An incremental budget may be a budget

prepared employing a previous periods budget or actual performance as
a basis with incremental amounts added or any amounts subtracted for
the new budget period. It is suitable for stable organizations. It is a
traditional method of budget preparation.
2. Zero-based budgeting: - Zero based budgeting is a budgeting method

where current year budget is prepared from scratch that is taking the
base as zero. Every single expense should be justified by the manager.
Using this method outdated operations can be identified and
discontinued however this approach is time consuming.
3. Rolling budget: - A rolling budget is a budget which is constantly kept up

to date by adding a further fiscal year ( month or quarter ) to the end of
the budget when the corresponding period in the current budget has
come to an end. One of its advantage is that managers are required to
revaluate budget which will be up to date. As compared to incremental
budget these are more expensive and time-consuming budgeting
method.
4. Activity-based budgeting: - Activity based budgeting is management

accounting instrument which does not take into account the previous
year budget to arrive at present year budget instead the activities that
incur cost are deeply analyzed. Based on the outcome of this study
resources are allocated to an activity. This method takes into
consideration all steps involved in an activity.
5. Fixed Budgets: - Fixed budget is made on the assumption that budgeted

activity will not differ from actual activity level. A fixed budget remains
the same irrespective of changed situation. A fixed budget assume that
conditions will remain constant. In this budget costs are not classified
according to their nature and forecasting of accurate result is difficult.
6. Flexible Budget: - A flexible budget is recast to match the altered
circumstances. Adjustments can be made if the situation demands. The
budget is changed if level of activity varies. The cost is classified as per
their nature i.e. fixed, variable, semi variable. It helps in making accurate
forecast.
7. Cash Budget: - Cash budget is that we estimate cash flows over a specific
period of time. In this budget we are estimating cash flows so we are
dealing with actual movement of cash so anything that is not cash will
not be dealt in the cash budget. Companies use this budget to ensure
that they have enough funds within the business to operate.
8. Performance Budgeting: - A performance budget is one that reflects

both the input of resources and therefore the output of services for
every unit of a corporation. The goal is to spot and score relative
performance supported goal attainment for specified outcomes.
9. Master Budget: - Combination of all functional budget is called master

budget. A master budget combines all the smaller budgets within your
business and turns them into one overall budget, so you can get a
comprehensive overview of your firm’s finances. The master budget
includes the HR, marketing, and all other departmental budgets to
produce an overall single budget.
10.Sale Budget: - Sale budget is the first and the basic component of the
master budget and it shows the expected number of sales units of a
period and the expected price per unit. It also shows total sales which
are simply the product of expected sales units and expected price units.
11.Capital budgeting: - Investment decisions are generally called capital

budgeting decisions. Capital budgeting is the process that a business
uses to determine which proposed fixed asset purchases it should
accept, and which should be declined.
12.Purchase Budget: - Purchase budget information is mainly driven from
production budget. The purchase budget shows the amount of direct
material for example raw material or component parts to be purchased
during the period and ending inventory requirement and their impact on
how much to purchase.
13.Production Budget: - Production budget means it shows the budgeted

quantity of output to be produced during a specific period. It has two
parts the first is production budget showing output for the period and
another part is showing production cost. Production budget is based on
sale budget unless production itself is a key factor
14.Direct Material Budget: - The direct materials budget calculates the

materials that must be purchased, by time, in order to fulfill the
requirements of the production budget. It is typically presented in either
a monthly or quarterly format in the annual budget
15.Labor Budget: - The direct labor budget shows the direct labor hours
required to satisfy the production budget. By knowing in advance how
much labor time will be needed throughout the budget year the
company can develop plan to adjust the labor force as the situation
requires.
16.Factory Overhead Budget: - The factory overhead budget should

provide a schedule of all manufacturing costs other than direct materials
and direct labor. This can include some variable and some fixed
components.
Variable manufacturing overhead is based on direct labor hours. Fixed
manufacturing overhead includes depreciation on the equipment
17.Functional budget: - A separate budget is prepared for each function of

the business is known as functional budget. For example, purchase
budget, sales budget, production budget, and labor budget.
18.Financial Budget: - Predicting the income and expenses of the business

on a long-term and short-term basis is known as financial budget. To
help the business achieve its goal in right way accurate projection of
cash flow will be useful. Financial budget preparation includes a detailed
budget balance sheet, cash flow budget, the sources of incomes and
expenses of the business, etc.
19.Administrative expense budget: - An administrative budget is usually

prepared on an annual or quarterly basis and identifies the costs of
running an operation that is not tied to producing a product or service.
This budget includes expenses from non-manufacturing departments,
such as sales, marketing, and human resource departments.
20.Selling Expense Budget: - A selling expense budget is a plan that

estimates the selling expenses that will occur in the period. A selling
expense are any costs related with marketing and selling a product to
customers. These expenses usually include store displays, signs,
advertising campaigns, and delivery costs to customers.
21.Long Term Budget: - Budgets that are prepared for periods exceeding
one year is called long term budget. They are for future planning. They
are a framework for preparing short term budget. Long term budget is
not meant for immediate implementation.
22.Short Term Budget: - Short term budget is prepared for a period less
than a year. Short term budget has practical value and are prepared for
actual implementation.
23.Basic budget: - Essentially it is a long-term budget. The conditions and

assumptions for preparing budgets should remain unaltered for a long
period. Basic budgets are like long-term budget act as a guideline for
preparing short-term budgets.
24.Current Budget: - A budget prepared for a short time is called a current

budget. It is meant for actual implementation. Conditions prevailing at
the present are the basis for preparing these budgets.
25.Functional Budgets: - A budget that relates to specific function of the

business for example sale budget, production budget is known as
functional budget. They contribute to the master budget and are
prepared for each function. Functional budget is dependent upon size
and nature of the business.

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UNIVERSITY OF CENTRAL PUNJAB

1. Incremental budgeting: - An incremental budget may be a budget

2. Zero-based budgeting: - Zero based budgeting is a budgeting method

3. Rolling budget: - A rolling budget is a budget which is constantly kept up

4. Activity-based budgeting: - Activity based budgeting is management

5. Fixed Budgets: - Fixed budget is made on the assumption that budgeted

8. Performance Budgeting: - A performance budget is one that reflects

9. Master Budget: - Combination of all functional budget is called master

11.Capital budgeting: - Investment decisions are generally called capital

13.Production Budget: - Production budget means it shows the budgeted

14.Direct Material Budget: - The direct materials budget calculates the

16.Factory Overhead Budget: - The factory overhead budget should

17.Functional budget: - A separate budget is prepared for each function of

18.Financial Budget: - Predicting the income and expenses of the business

19.Administrative expense budget: - An administrative budget is usually

20.Selling Expense Budget: - A selling expense budget is a plan that

23.Basic budget: - Essentially it is a long-term budget. The conditions and

24.Current Budget: - A budget prepared for a short time is called a current

25.Functional Budgets: - A budget that relates to specific function of the

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