BUDGET Flashcards
What is the budgeting process?
Budgeted reports are prepared
Actual reports are prepared
Variance reports are prepared
Decisions are made
What is the budgeted report?
The budgeted report is prepared to predict what is likely to occur in a reporting period.
What is the actual report?
The actual report is prepared to detail what has actually happened in the current period.
What are variance reports?
Variance reports are prepared to highlight the differences or problem areas.
What is the decision stage of the budgeting process?
Decisions are made based on the reports to improve business performance for the next period.
What is a cash budget?
The cash budget is an accounting report that; predicts future cash receipts and payments, determines the expected cash surplus OR deficit and thus estimates the bank balance at the end of the period.
What is a budgeted income statement?
A budgeted income statement is an accounting report that predicts future revenue earned and expenses incurred and thus the expected net profit or loss for the period.
What is a variance report?
Variance reports are accounting reports that compare budgeted figures to actual figures, highlighting variances so that problems can be identified and corrective action taken.
What is variance?
Variance is the difference between actual figures compared to budgeted figures, expressed as favourable or unfavourable.
What is favourable variance?
A variance that is favourable means that cash will be higher than expected in the budget.
What is an unfavourable variance?
A variance that is unfavourable means that cash will be lower than expected in the budget.
What is budgeting?
Budgeting is the process of predicting/estimating the financial consequences of future events.
