2.2.4

Question 1

What are budgets?

Answer 1

Forecasts or plans for the future finances of a business

Question 2

What 3 things can budgets be?

Answer 2

• Income
• Expenditure
• Profit

Question 3

What are income budgets?

Answer 3

A target set for the amount of revenue to be achieved in a set time period

Question 4

What are expenditure budgets?

Answer 4

A limit placed on the amount to be spent in a given period of time

Question 5

What are profit budgets?

Answer 5

A target set for the surplus between income and expenditure in a given period of time

Question 6

What are the 2 types of budgets?

Answer 6

• Historical figures

- Zero based

Question 7

When comparing the budget to the actual, what is the difference referred to as?

Answer 7

A variance

Question 8

What is a variance?

Answer 8

The difference between the actual income, expenditure or profit and the figure that has been budgeted

Question 9

Is an adverse variance good or bad for the business?

Answer 9

Bad

Question 10

Is a favourable variance good or bad for the business?

Answer 10

Good

Question 11

What are the 5 possible causes of variances?

Answer 11

• Action of competitors
• Action of suppliers
• Changes in the economy
• Internal inefficiency
• Internal decision making