Budgets are necessary for running any business efficiently and effectively.
Budget Development Process. Assumptions related to projected sales, trends, cost trends, and the overall economic outlook is established for the upcoming period. The budget is then published and outlines the standards and procedures used to develop it. The master budget includes forecasts of cash inflows and outflows, budgeted financial statements, and an overall financing plan.
Static Vs. Flexible Budgets. A static budget remains unchanged over the life of the budget. A flexible budget has a relational value to certain variables, such as sales levels, production levels, or other economic factors.