2.2.4 Budgets Flashcards
1
Q
purpose of budegts
A
- financial plan
- based on business objectives
- managers must think ahead
2
Q
why are budgets set up
A
- plan to anticipate problems
- motivation for managers
- decisions give power to make financial decisions
- control set against objectives
3
Q
define budgets
A
forecasts for the future of finances of a business
4
Q
define income budgets
A
target set for amount of revenue to be achieved in a set time period
5
Q
factors of expenditure benefits
A
- limit placed
- allows for monitoring
- informs predicted cash outflows
6
Q
factors for profit budgets
A
- target set for the surplus
- used to inform decision making
7
Q
historical figures budgets
A
- based on previous years
- can be adjusted in line with actual outcomes
8
Q
zero based budgets
A
- all departments have to justify requests
- time consuming but flexible
9
Q
define adverse
A
bad variance
10
Q
define favourable
A
good variance
11
Q
causes of variance
A
- actions of competitors
- actions of supplies
- changes in economy
- internal efficiency
- internal decision making
12
Q
difficulties of variance
A
- dependent upon predications
- costs subject worldwide
- actions of competitors or unknown
- managers may lack experience
- subject to bias
- time consuming
