Types of Budgets

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Rolling up the budgets

To coordinate departmental budgets into the master budget, begin by incorporating estimated productions costs, sales projections of volume and price, estimated spending on marketing and promotions, and estimated distribution, selling, and administrative costs into the operating budget. Next, incorporate your planned capital investments into your capital budget. Then, incorporate the operating budget and the capital budget into your cash budget. "Roll up" your cash budget into your budgeted balance sheet, and then "roll up" that into the budgeted statement of cash flows.

Department or unit managers are most frequently asked to develop operating budgets and capital budgets for their departments. You can also create subsets of the operating and capital budgets for individual projects, geographic locations, or large, line-item expenses such as advertising. These detailed schedules allow you to keep a closer eye on revenues and expenses within your department.

The diagram below shows how departmental operating and capital budgets are coordinated to create financial budgets including the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows. All of these budgets together are "rolled up into" the master budget, summarizing the financial projections within an organization for a given period of time.

Coordinating departmental budgets into the master budget

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