3.9 Budgets Flashcards
what is budgeting
process of creating a plan to spend you money
what does budgeting allow you?
allows you to determine in advance wether you will have enough money to do the things you need to do or would like to do
what does budgeting ensures?
ensures that you will always have enough money for the things you need and the things that are important to you
what is a business budget
for a business a budget is the detailed financial plan for the future and it involves the expected costs and revenues or a cash flow fore cast for a predetermined period of time
what is a budget in a business used for?
a budget is produced in order to help a business to achieve its organizational objectives and to plan for the finances needed to implement a business strategy
what is revenue
Any money coming into a business from its sales
what is cost
Are expenses incurred by business
revenue streams
Refers to the various sources of revenue for a business
what is a cost center?
distinct part of a business that does not directly add to the profit but still costs money to operate. managers of cost centers have a responsibility to keep the costs of their department within their set budgets. IT and accounting are an example
what is a profit center?
department that generates revenue and incurs costs for the business. Examples of profit centers are sales, production, and service. responsible for generating revenue and contributing to the overall profitability of the business and to organizational profits.
This helps businesses determine which areas/units are the most and least profitable.
There are different ways to group profit centers. It might be done geographically (Europe, North America, Asia),
3 role of costs and profit centers
financial, organizational, motivational
what does the role of finance have to do in cost and profit centers
Compare costs and profits across different areas
Can help set the price once all costs are known
what does the role of organizational have to do in cost and profit centers
Can help with the organization of resources improve efficiency
Can use strategies from successful centers to improve other areas
what does the role of motivational have to do in cost and profit centers
Targets can be set in each center to motivate workers
Company can recognize best performing centers
what is a budget?
detailed financial plan for the future, usually involving the expected costs and revenues or a cash flow forecast, for a pre-determined period of time.
