Budgeting Chapter 5

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Budgeting and why we should
Chapter 5 talks about financial plans and budgets, so what financial tools described in this chapter can help me make better financial decisions? The financial tool described in this chapter that can help me make better financial decisions are various budgeting methods, comprehensive budget and specialized budget. These include the cash budget, cash flow budget, specialized budget, tax budget. Other financial tools include financial statements, accounting for risk and time value of money, observing and adjusting to business climates. Cash budgets are meant to paint a picture of spending month to month for better tracking and management. Cash flow budgets keep track of the flow of cash from within a specified period to keep track of where the money is coming and going. Specialized budgets are used for financial activities that need divided attention and separate handling from the comprehensive budget.
A comprehensive budget is the budget that covers all of ones financial life. So what are the components of a comprehensive budget and what is the purpose of each component? The components of a comprehensive budget are operating budget and capital budget. Within the operating budget are the recurring expense and income items such as rent payments and paycheck. The capital budget includes items that are …show more content…
So how are specialized budgets prepared? Specialized budgets are prepared by first identifying the specific financial aim that one is trying to achieve, then separating incomes and expenses associated with the specified goal. The purpose of a specialized budget is to prepare the financial means to achieve a specific goal. An example of a specialized budget is the tax budget. The saying," nothing is certain except for death and taxes", rings especially true with respect to the tax budget. Tax is unavoidable so better to prepare for its arrival than

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