A budget that presents a forecast of an entity’s expense items to be incurred and revenue to be generated from its daily or core operations. It provides a detailed projection of an entity ‘s expectations on its “operational” revenue and expenses over a period of time (e.g., 1, 2 years, etc.) The operating budget presents on the face of the account: operating expenses, including cost of sales (products/ goods sold) or the revenue or income. An entity, using an operating budget, can keep its business finances on track and control its growth targets, etc.

Operating budgets (and their composition) vary depending on scope or level of operation: this includes the budgets for sales, manufacturing costs (materials, labor, and overhead) or merchandize purchases, selling expenses, and general and administrative expenses.

A direct materials budget is an operating budget.