2.2.4 budgets Flashcards
1
Q
what is a budget
A
a spending plan based on income and expenses
2
Q
3 types of budgets
A
profit, income, expenditure
3
Q
purpose of a budget
A
- set targets
- assign responsibilities
- communicate targets
- delegate without loss of control
- motivate staff
- control income + expenditure
4
Q
information needed to write a budget
A
historical data, own knowledge, market research
5
Q
benefits of a budget
A
- manage your money effectively
- monitor performance
- meet your objectives
- improve decision-making
- plan for the future
- increase staff motivation
6
Q
2 main approaches to budgeting
A
- historical
- 0-based
7
Q
historical budgeting
A
- use last years figures as the basis for the budget
- realistic in that it is based on actual results
8
Q
0-based budgeting
A
- budgeted costs and revenues are set to 0
- budget is based on new proposals for sales and costs
9
Q
key 2 sources for information for budgets
A
- financial performance in previous periods
- market research
10
Q
difficulties in budgeting accurately
A
- external shocks
- competitors may release more attractive products
- changing disposible income
- unexpected costs
11
Q
variance analysis
A
calculating and investigating the differences between actual results and the budget
12
Q
favourable variances
A
- actual figures are better than budgeted figure
13
Q
adverse variances
A
- actual figure is worse than budget figure
