224 budgets

Question 1

why would a business set up a budget?

Answer 1

plan: helps in planning future growth and identifying potential financial risks.

control: monitors and controls spending to avoid overspending.

decisions: ensures resources are used efficiently in critical areas.

Question 1

What is the purpose of budgets?

Answer 1

financial plan for the business, outlining expected incomes and expenditures over a specific period. it helps in setting financial goals, controlling costs and guiding strategic decisions

Question 2

what are the 3 keywords to why a business should set up a budget?

Answer 2

planning.
control.
decisions.

Question 3

what is zero-based budgeting?

Answer 3

is a budgeting method where each new periods start with zero, and every expense must be justified (explained) and approved based on current needs and effectiveness rather than relying on previous(past) budgets

Question 4

What is the historical figures’ budget?

Answer 4

Historical figures budget is a budgeting method where past financial data is used to predict future budgets. It involves analysing previous years’ budgets and actual financial outcomes to inform current budgeting decisions.

Question 5

What is Variance analysis?

Answer 5

is a financial tool used to compare actual performance against budgeted or planned figures. it identifies the difference(variance) and analyses the reason behind these differences to improve future budgeting and decision-making

Question 6

What’s the formula for variance?

Answer 6

variance = budgeted amount - actual amount.

Question 6

what are favourable variance and adverse variance?

Answer 6

favourable variance: when actual sales are better than budgeted or planned figures.
adverse variance: when actual sales are worse than budgeted or planned figures

Question 6

give me 3 difficulties of budgeting

Answer 6

1. predicting future income and expenses accurately can be difficult. due to market changes and unexpected events.
2. inaccurate data from past budgeting or unreliable forecasting tools can lead to incorrect assumptions resulting in budgets that don’t match actual performance.
3. limited financial and human resources can slow down effective budget planning and excision(carrying out plans )

Question 7

what is the budget and actual results?

Answer 7

budget: it’s a financial plan or target for a specific period. includes the ex[expected income and expenditure that a business aims to achieve.

actual results: these are real financial outcomes for the same period. it shows the actual income earned and expenses incurred(become a subject )

Question 7

What is an example of budget vs actual sales?

Answer 7

Example: Budget: planned to make 10,000 in sales and spend 7,000 on costs.

Actual sales: made 9,500 in sales and spent 7,500 on costs.