Types of budgeting

by arjan kc
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Types of Budgeting
Budgeting techniques vary based on the specific objectives, priorities, and characteristics of governments and organizations. Different types of budgeting cater to diverse needs and contexts. Here are some common types of budgeting:
Incremental Budgeting: This approach builds on the previous period’s budget, making incremental adjustments for the upcoming period. It’s simple but can lead to inefficiencies if not closely monitored.
Zero-Based Budgeting: This method starts each budget cycle from zero, requiring all programs and activities to justify their funding. It aims to eliminate inefficiencies and prioritize resources based on current needs.
Performance-Based Budgeting: This approach links budget allocations to expected program outcomes. It emphasizes accountability and efficiency by aligning funding with achieved results.
Program Budgeting: Organizing the budget around programs and activities rather than traditional departmental lines. It focuses on the outcomes and benefits of government programs.
Priority-Based Budgeting: This technique involves prioritizing budget allocations based on the importance and urgency of programs. It requires clear criteria for ranking and funding activities.
Activity-Based Budgeting: It allocates resources based on the cost and benefit analysis of specific activities or projects. It ensures efficient resource allocation by focusing on the value derived from each activity.
Flexible Budgeting: This approach adjusts the budget based on changes in activity levels. It’s especially useful when activity levels fluctuate, allowing for dynamic resource allocation.
Cash Budgeting: A budget that focuses on cash inflows and outflows rather than accrual-based accounting. It helps manage liquidity and short-term financial needs.
Capital Budgeting: Allocates funds specifically for capital expenditures, such as infrastructure projects or acquisitions. It ensures proper planning for long-term investments.
Rolling Budgeting: This technique involves continuously updating the budget by adding a new period as the current period is completed. It provides a dynamic view of future financial needs.
Outcome-Based Budgeting: Similar to performance-based budgeting, this approach focuses on achieving desired outcomes and impacts rather than just activities.
Participatory Budgeting: Involves citizens and stakeholders in the budgeting process, enhancing transparency and public involvement in resource allocation.
Brief Study Notes:
Incremental Budgeting: Adjusts prior budgets incrementally.
Zero-Based Budgeting: Justifies all spending anew.
Performance-Based Budgeting: Links budget to outcomes.
Program Budgeting: Organizes budget by programs.
Priority-Based Budgeting: Allocates based on importance.
Activity-Based Budgeting: Focuses on activity costs and benefits.
Flexible Budgeting: Adjusts budget to activity changes.
Cash Budgeting: Focuses on cash flows.
Capital Budgeting: Allocates for long-term investments.
Rolling Budgeting: Updates budget continuously.
Contemporary Approaches: Reflecting diverse needs.
Adapting Techniques: Tailoring budgeting to objectives.
These study notes provide an overview of different types of budgeting. Students can explore how these approaches are applied in various contexts, analyze their strengths and limitations, and discuss the importance of selecting the appropriate budgeting method based on the organization’s goals and circumstances.

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