2.2.4 Budgets Flashcards
1
Q
Define budget
A
This is a financial plan for the future, should drive many decisions across the functional area of a business
2
Q
What are historical budgets
A
This is when you use data previously available when adjusted based on future events and estimation
3
Q
What is zero based budgeting
A
This is when you have no budget and instead every purchase has to be justified
Good for minimising unnecessary costs but it is also time consuming
4
Q
What are some problems with budgets
A
- a budget is only accurate as the data on which it is based
- past trends can be poor indicator for the future
- new decisions taken by government and public bodies can affect budget
- when a budget is unrealistic it loses all value as a motivation tool
5
Q
What is variance analysis
A
This is when you compare the forecast data to the actual figures
- used to judge accuracy of a process