2.2.4 budgets Flashcards
1
Q
what are budgets?
A
a budget is a detailed plan of income and expenses over a certain period of time
2
Q
what is the purpose of setting a budget?
A
- ensure efficiency in spending
- helps a business achieve its financial and wider objectives
3
Q
budgets can be…
A
budgets can be either income budgets(revenue and earnings) or expenditure budgets
4
Q
what are the two types of budgets?
A
historical and zero-based budgeting
5
Q
what is historical budgeting?
A
- setting budgets based on previous years and adjusted based on estimations
6
Q
what is zero-based budgeting?
A
- any spending has to be justified with the budget holder. it can be time-consuming but is flexible and can reduce waste
7
Q
what is variance?
A
compares the actual figures to what’s been budgeted
8
Q
what can cause variances?
A
- changes in economy
- action of competitors
- action of suppliers
- internal inefficiency
9
Q
what are the difficulties of budgeting?
A
- costs are subject to change
- action of competitors are unknown
- can be biased
- managers may lack experience
