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The Components Of A Comprehensive Budget And What Is The Purpose Of Each Component?

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Budgets
a. What financial tools described in this chapter can help you make better financial decisions? In this week’s chapter we have learned primarily about budgets, how they work, and how to make and use them. The main types of budgets are the operating budget, the capital budget, the comprehensive budget, the specialized budget, the tax budget, and the cash flow budget.
All of the financial tools we read about in this chapter could assist in making financial decisions. Creating budgets requires that you analyze your financial situation, your needs, your past financial history and your tendencies. Thinking that much about your financial situation will help you make better financial decisions just by knowing that information better. Budgets also …show more content…

b. What are the components of a comprehensive budget and what is the purpose of each component?
A comprehensive budget is created by combining two types of budgets. The first is the operational budget which consists of recurring income and expenses. The textbook (Siegel, R., and Yacht, C.,) gives examples of recurring expenses as loan payments, living expenses, saving and investment deposits (p. 92). The second budget is the capital budget, which in contrast to the operational budget consists of non-recurring incomes and expenses. The textbook (Siegel, R., and Yacht, C.,) gives the examples of capital expenditures and purchases of durable items as examples of non-recurring items (p. 92). The purpose of combining the operational and capital budgets into one budget is to make the comprehensive budget as complete as possible (thus the name comprehensive). The comprehensive budget is meant to represent both the long and short term and to give a broad overview. In my comprehensive budget I have an operational budget which includes items like rent, giving, and saving. I also have a capital budget that includes stocks and bonds.
c. How are specialized budgets prepared? What is the relationship of

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