The basis of a company’s financial plan is its budget. The article gives detail understanding of 15 Different Types of Budgeting in Tourism Accounting. An organization may determine how much money it needs to achieve its objectives by using budgets. An analysis of the available capital, revenue, and costs is included in every budget. This makes it possible for businesses to prioritize various company operations and determine profitability.
In tourism sector, budgeting is a taboo topic that may comes as tedious and tough to do. However, in dealing with any kind of tourism services either as supplier or receiver, budgeting is the one where all packages and services goes to in the final way.
There are 15 Different Types of Budgeting in Tourism Accounting:
- Sales budget – an estimate of future sales, often broken down into both units. It is used to create company and sales goals.
In Tourism sector, the sales of each travel services and product has been calculated and assembled to make a proper package, Each service has been added along with their rates marked for the sale purpose.
- Production budget – an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Created by product-oriented companies.
- Capital budget – used to determine whether an organization’s long-term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.
In the tourism sector, there is required to be heavy investments in the tourism superstructures catered to visitors, tourists and stakeholders. To build such structures, capital budget is an inevitable resource.
- Cash flow/cash budget – a prediction of future cash receipts and expenditures for a particular time-period. It usually covers a period in the short-term future. The cash flow budget helps the business to determine when income will be sufficient to cover expenses and when the company will need to seek outside financing.
- Conditional budgeting– It is a budgeting approach designed for companies with fluctuating income, high fixed costs, or income depending on sunk costs, as well as NPOs and NGOs. It’s a budgeting strategy meant for businesses with variable revenue, high fixed expenses, or income based on sunk costs, as well as non-profits and non-governmental organizations. A marketing budget is an estimation of the money required for public relations, advertising, and promotion in order to sell a good or service.
- Marketing budget – It is an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service. The amount of money a business allots to marketing initiatives (such as sponsored content, paid advertising, and marketing automation software) with the goal of promoting its products is known as its marketing budget. It supports both new and existing businesses in achieving their objectives and effectively managing their resources.
- Project budget – a prediction of the costs associated with a particular company project. These costs include labor, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. A cost estimate is used to establish a project budget.
- Revenue budget – It consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies.
- Expenditure budget – It includes spending data items. The budget that is allocated towards tourism resources and making different tourism products and services.
- Flexibility budget – It is established for fixed cost and variable rate is determined per activity measure for variable cost. A flexible budget is one that can be altered to account for variations in production or activity levels. A flexible budget is intended to be flexible enough to adjust to variations in sales volume, production volume, or other metrics of company activity, in contrast to a static budget, which is predicated on a set level of activity or output.
- Appropriation budget – A maximum amount is established for certain expenditure based on management judgment. The term “appropriation” or “re-appropriation” refers to the allocation of a certain amount of funds to cover costs associated with a specific project as stated in the Detailed Demands for Grants. It is only effective for the fiscal year in which it is created.
- Performance budget – It is mostly used by organization and ministries involved in development activities. This process of budget takes into account the end results.
- Zero-based budget – A budget type where every item added to the budget needs approval and no items are carried forward from the prior year’s budget. This type of budget has a clear advantage when the limited resources are to be allocated carefully and objectively. Zero based budgeting takes more time to create as all pieces of the budget need to be reviewed by management.
- Personal budget – A budget type focusing on expenses for self or for home, usually involving an income to budget. A personal budget is a financial plan that divides one’s future earnings between savings, debt payments, and spending. Making and adhering to a workable plan are essential components of personal budgeting.
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