Question

Nonprofits can develop budgets for general operations and capital spending. Describe the difference between these two different budgets. Why do nonprofits develop two different budgets? What are some advantages and disadvantages of having separate operations and capital budgets?

Answer 1

Differences :

1. Operational budgeting is on daily/Annual basis whereas capital budgeting is done for longer tenure generally 3-5 years
2. Operating budgeting is more inclined towards payment of the bills and meetig other current liabilities whereas capital budgeting is for purchase of Fixed assets or payment for long term liabilities.
3. Operational budgeting depends on expected cash flows from the annual operations of buying and sellimg of goods or services whereas capital budgeting depends on future cash flows from external and internal finances.