2.2.4 Budgets Flashcards
1
Q
What are budgets?
A
Financial plans that forecast revenue from sales and expected costs over a time period.
2
Q
What are income budgets?
A
A target set for the amount of revenue to be achieved in a time period.
3
Q
What are expenditure budgets?
A
A target set for the amount of costs to be achieved in a time period.
4
Q
What are profit budgets?
A
The difference between the income and expenditure budgets
Profit budget = Income budget − Expenditure budget
5
Q
What is variance?
A
The difference between the predicted and actual budget.
6
Q
What is adverse variance?
A
BAD FOR BUSINESS
Expenditure > budgets
Income < budget
Profit < budget
7
Q
What is favourable variance?
A
GOOD FOR BUSSINESS
Expenditure < budget
Income > budget
Profit > budget
