Operating budget
In one sentenceThe set of budgets covering the day-to-day activity for the coming period: sales, their cost and expenses, ending with a budgeted income statement.
Simply put
The operating budget answers one question: how much will we earn from our normal business? It brings together the sales budget, purchases or production, salaries, rent and the other expenses.
Purchases of large assets and loans are not part of it; those belong in the capital budget and the cash budget.
Worked example
A pharmacy prepares its operating budget for next year.
Expected sales500,000 SAR
Cost of goods sold300,000 SAR
Salaries90,000 SAR
Rent60,000 SAR
Expected operating profit = 500,000 − 300,000 − 90,000 − 60,00050,000 SAR
Don't confuse it with
Capital budgetThe capital budget is for long-term assets, and the operating budget is for the revenues and expenses of the same year.