2.2.4 - Budgets Flashcards
1
Q
What is a budget?
A
Financial plan for the future
2
Q
What are the 2 key purpose of budgets?
A
- Control and monitoring
- Motivation
3
Q
What are zero based budgets?
A
Budget created with all spending justified to ensure value for money
4
Q
Advantage and Disadvantage of zero based budgets
A
+ Helps to minimise costs
- Time consuming
5
Q
What is historical based budgeting?
A
Creating a budget based on historical data
6
Q
Advantage and disadvantage of Historical based budgeting
A
+ Quick to assume using prior data
- Lacks reliability and could be out of date
7
Q
What is variance analysis?
A
Compares budgeted figure with actual figures
8
Q
Difficulties of budgeting
A
- Unachievable budgets can have a negative impact on motivation
- Take time and skill
- Can lead to tensions and competitions
