Budget methods can be divided into fixed budget method and flexible budget method according to the different quantitative characteristics of business base.

(A) fixed budget method

Fixed budget, also known as static budget, refers to a method of budgeting only according to the normal and achievable level of fixed business volume (such as production and sales) during the budget period.

The disadvantage of fixed budget method is poor adaptability and comparability.

(B) flexible budget method

Flexible budget, also known as variable budget or sliding budget, refers to a method designed to overcome the shortcomings of fixed budget method. It is based on the interdependence among business volume, cost and profit, and on various predictable business volume levels during the budget period, and can prepare a budget that can adapt to various situations.

The business volume of compiling flexible budget can be output, sales volume, direct labor hours, machine hours, material consumption or direct labor wages.

Compared with the fixed budget method, flexible budget method has the advantages of wide budget range and strong comparability.

Theoretically, this method is suitable for compiling all budgets related to business volume in comprehensive budget, but in practice, it is mainly used for compiling flexible cost budget and flexible profit budget, especially for compiling expense budget.

The main methods of compiling flexible cost (expense) budget are: formula method, list method and graphic method.

Big category.

(A) incremental budget method

Incremental budget, also known as adjustment budget method, refers to a budget preparation method based on the cost and expense level in the base period, combined with the future changes of business volume level and related influencing cost factors during the budget period, and by adjusting the original expense items.

The assumptions of incremental budget method are: (1) existing business activities are necessary for enterprises; (2) The original cost is reasonable; (3) It is worthwhile to increase the cost budget.

The disadvantages of incremental budget method are: (1) limited by the original cost items, which may lead to backward guarantee; (2) Developing "equalitarianism" and "simplism" in the budget; (3) It is not conducive to the future development of the enterprise.

(B) Zero-based budgeting method

Zero-based budget, also known as zero-based budget, refers to a method of preparing cost budget on the basis of comprehensive balance, regardless of the items or amounts of expenses incurred in previous accounting periods, but taking all budgetary expenditures as the starting point, considering the actual needs and possibilities one by one, and whether the contents and expenditure standards of various expenses during the budget period are reasonable.

The procedure of zero-based budgeting is: (1) mobilizing discussion; (2) Divide unavoidable items and avoidable items; (3) Divide non-deferrable projects and deferrable projects.

The advantages of zero-based budget are: it is not limited by existing cost items and expenditure levels; Can mobilize the enthusiasm of all parties to reduce costs and contribute to the development of enterprises. Its disadvantages are heavy workload, lack of focus and long preparation time.

This method is especially suitable for the preparation of service department expense budget whose output is difficult to identify.