Budgeting

Question 1

Budget

Answer 1

A quantitative statement, for a defined period of time, which may include planned revenues, expenses, assets, liabilities and cash flows

Question 2

Budget manual

Answer 2

A collection of instructions governing the responsibilities of persons and the procedures, forms and records relating to the preparation and use of budgetary data

Question 3

Principal budget factor

Answer 3

The budgeted factor which limits the activities of an organisation

Question 4

Functional budgets

Answer 4

The budgets for the various functions of the business eg, production, marketing,
sales, purchasing budgets

Question 5

Sensitivity analysis

Answer 5

Assesses how sensitive a budget is to changes in the budget assumptions

Question 6

Linear regression analysis

Answer 6

A technique for estimating the equation of a line of best fit

Question 7

Cause and effect relationship

Answer 7

A cause and effect relationship (also known as a causal relationship)
exists between two variables when a change in one causes the change in the other

Question 8

Time series

Answer 8

A time series is a series of observations recorded over time. Any pattern found in the data is assumed to continue into the future and a forecast is produced. There are four components of a time series: trend, seasonal variations, cyclical variations and random variations

Question 9

Trend

Answer 9

The trend is the long-term underlying movement in the data

Question 10

Seasonal variation

Answer 10

Seasonal variations are short-term patterns that occur during different periods,
such as rush hour during the day, weekdays during the week, or warmer months of the year

Question 11

Cyclical variations

Answer 11

Cyclical variations are medium- to long-term patterns such as economic booms and recessions. In practice, they are difficult to predict and model

Question 12

Random variations

Answer 12

Random variations are the product of randomness and so cannot be predicted

Question 13

Moving average

Answer 13

A moving average is an average of the data of a fixed number of periods. The aim of calculating moving averages is to remove the effect of seasonal variations, for use in forecasting long-term trends.

Question 14

Data outliers

Answer 14

Data outliers are observations that are abnormal and can therefore significantly distort the results. Sometimes outliers are removed from the data set before applying forecasting techniques.

Question 15

Data analytics

Answer 15

The process of collecting, organising and analysing large sets of data to discover patterns and other information which an organisation can use for its future business decisions

Question 16

Data mining

Answer 16

The process of sorting through data to identify patterns and relationships between different items

Question 17

Structured data

Answer 17

Data that is contained within a field in a data record or file (eg, databases and spreadsheets)

Question 18

Unstructured data

Answer 18

Data that is not easily contained within structured data fields, such as pictures, videos, webpages, PDF files, emails or blogs

Question 19

Incremental budgeting

Answer 19

Basing this year’s budget on last year’s budget with adjustments for changes and inflation

Question 20

Imposed budget

Answer 20

A budget set without allowing the budget holder to participate in the budgeting process

Question 21

Participative budgeting

Answer 21

Budgeting style which allows all budget holders to participate in setting their own budget

Question 22

Budget slack

Answer 22

Deliberately underestimating revenues or overestimating costs in order to ensure that
achieving the budget is easy

Question 23

Zero-based budgeting

Answer 23

Involves preparing a budget for each cost centre from a zero base

Question 24

Rolling budget

Answer 24

A budget continually updated to add a new budget period as the most recent one
has finished