budgeting

Question 1

What is a budget? What does it include?

Answer 1

A financial plan for the future. An estimate of income and expenditure

Question 2

What is the purpose of budgets?

Answer 2

• Motivation

* Control + monitoring

Question 3

What are the two types of budget?

Answer 3

• revenue

* expenditure

Question 4

What is a historical budget?

Answer 4

Using previous years income and expenditure to base next years budget on

Question 5

What is a zero-based budget?

Answer 5

Used by start ups, takes away historical assumptions.

Question 6

Two advantages of zero based budgeting

Answer 6

• a questioning attitude is taken

* allocation of resources improved

Question 7

Two disadvantages of zero based budgeting

Answer 7

• time consuming

* skilful decision making required

Question 8

What is budget variance?

Answer 8

The difference between budgeted costs and actual costs

Question 9

What does it mean if budget is favourable?

Answer 9

Actual figures better than budgeted ones

Question 10

What does it mean if budget is adverse?

Answer 10

Actual figures are worse than budgeted ones

Question 11

Variance % formula

Answer 11

Actual data-budgeted data/

Budgeted data X100

Question 12

Variance formula

Answer 12

Actual data- budgeted data