3.5.2 (1) budgets Flashcards
what is a budget?
a financial target for the future covering revenue and expenditure over a certain time period
what is an expenditure budget?
a fixed sum of money to be spent in a given time period by a department or business
what is a budget holder?
a person who is accountable for seeing that a budget is kept to
what is an income budget?
the sales revenue target for a department or whole business
what is a delegated budget?
giving some control in the setting and spending of budgets to departments or individuals
what is a profit budget?
the target profit for the business over a given time period
how is the profit budget created?
combining the expenditure and income budgets
what is monitoring budgets?
keeping a check on progress towards achieving targets during the budget period
what is variance analysis?
the difference between the budgeted figure and the actual figure achieved
what is favourable variance?
when the actual figure is better than the budgeted figure
what is adverse variance?
when the actual figure is wore than the budgeted figure
benefits to a business of analysing budgets:
compare actual and predicted values
budgets can be revised
actions can be taken to reverse adverse variance
able to spot strengths & weaknesses
what is historical figure budgeting?
using last year’s figures as the main determinant of this year’s budget.
minor adjustments will be made for inflation and other foreseeable changes.
what is zero budgeting?
where the business sets each department’s budget at zero and demands that the budget holder justify every pound they ask for
what are the 6 features of budget production:
- spreadsheet software
- set budget for at least 12 months
- focus on monthly sales forecasts
- include ALL costs
- keep cumulative totals of profit or loss
- monitor each budget monthly
