Budgeting Flashcards
Budget
A quantitative statement, for a defined period of time, which may include planned revenues, expenses, assets, liabilities and cash flows
Budget manual
A collection of instructions governing the responsibilities of persons and the procedures, forms and records relating to the preparation and use of budgetary data
Principal budget factor
The budgeted factor which limits the activities of an organisation
Functional budgets
The budgets for the various functions of the business eg, production, marketing,
sales, purchasing budgets
Sensitivity analysis
Assesses how sensitive a budget is to changes in the budget assumptions
Linear regression analysis
A technique for estimating the equation of a line of best fit
Cause and effect relationship
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
Time series
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
Trend
The trend is the long-term underlying movement in the data
Seasonal variation
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
Cyclical variations
Cyclical variations are medium- to long-term patterns such as economic booms and recessions. In practice, they are difficult to predict and model
Random variations
Random variations are the product of randomness and so cannot be predicted
Moving average
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.
Data outliers
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.
Data analytics
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
Data mining
The process of sorting through data to identify patterns and relationships between different items
Structured data
Data that is contained within a field in a data record or file (eg, databases and spreadsheets)
Unstructured data
Data that is not easily contained within structured data fields, such as pictures, videos, webpages, PDF files, emails or blogs
Incremental budgeting
Basing this year’s budget on last year’s budget with adjustments for changes and inflation
Imposed budget
A budget set without allowing the budget holder to participate in the budgeting process
Participative budgeting
Budgeting style which allows all budget holders to participate in setting their own budget
Budget slack
Deliberately underestimating revenues or overestimating costs in order to ensure that
achieving the budget is easy
Zero-based budgeting
Involves preparing a budget for each cost centre from a zero base
Rolling budget
A budget continually updated to add a new budget period as the most recent one
has finished
