15A : Budget

Question 1

What is a budget

Answer 1

is a financial plan for a business’s income and expenses over a specific time.

Question 2

Why do businesses set a budget

Answer 2

• monitoring : if they are under or over budget management can take steps to correct

• planning : forces businesses to think ahead budget helps anticipate problems and their solutions

• controls : helps managers to measure whether they are achieving what they set out to achieve

Question 3

What are some problem of setting a budget

Answer 3

• Collecting information : difficult to collect all the data in a large company

• opportunity cost : time spent making budgets could have been spent on other tasks

• external influences : rival businesses can make it difficult to set and keep to budget

Question 4

What are the two types of budget

Answer 4

• sales budget : shows the planned income or Revenue for a period of time

• expenditure budget : shows how much money a business is expected to spend over a period of time