What are the two main types of budgets in an organization?

The two main types of budgets in an organization are Capital and Operating budgets.

Capital budgets are concerned with long-term investments in fixed assets such as buildings, equipment, and vehicles. These budgets are crucial for planning and controlling expenditures that will benefit the organization over several years, helping to assess whether proposed investments will produce sufficient returns.

Operating budgets, on the other hand, focus on the short-term operational costs associated with running the organization on a day-to-day basis. This includes revenues and expenditures related to regular operations like salaries, utilities, and supplies. Effective management of the operating budget is vital for ensuring that the organization can meet its financial obligations and operate efficiently.

Understanding both types of budgets is essential for financial planning and management within an organization, as they serve different but complementary purposes within the overall financial strategy.