Budgeting

Question 1

What is a budget?

Answer 1

A budget is a financial plan that outlines expected income and expenditures over a period.

Question 2

What are the key concepts of budgeting?

Answer 2

Income, expenses, savings, surplus, and deficit.

Question 3

Why is budgeting important?

Answer 3

It helps in financial control, goal setting, debt management, and emergency preparedness.

Question 4

What are the different types of budgets?

Answer 4

Personal budgets, business budgets, government budgets.

Question 5

What is the difference between a surplus and a deficit?

Answer 5

A surplus occurs when income exceeds expenses, while a deficit happens when expenses exceed income.

Question 6

What is a fixed budget?

Answer 6

A budget that remains constant regardless of changes in activity levels or revenue.

Question 7

What is a flexible budget?

Answer 7

A budget that adjusts based on changes in production levels or revenue.

Question 8

What are the pros of a fixed budget?

Answer 8

Simplicity, easy monitoring, and financial discipline.

Question 9

What are the cons of a fixed budget?

Answer 9

Inflexibility and unsuitability for dynamic environments.

Question 10

What are the pros of a flexible budget?

Answer 10

Accuracy, adaptability, and better decision-making.

Question 11

What are the cons of a flexible budget?

Answer 11

Complexity and difficulty in setting precise goals.

Question 12

What is incremental budgeting?

Answer 12

A budgeting method that uses the previous year’s budget as a base and adjusts it incrementally.

Question 13

What are the pros of incremental budgeting?

Answer 13

Simplicity, efficiency, and financial stability.

Question 14

What are the cons of incremental budgeting?

Answer 14

Risk of inefficiency, no reevaluation of costs, and encourages budget creep.

Question 15

What is zero-based budgeting (ZBB)?

Answer 15

A method where the budget starts from zero, and every expense must be justified.

Question 16

What are the pros of zero-based budgeting?

Answer 16

Cost efficiency, alignment with goals, and better accountability.

Question 17

What are the cons of zero-based budgeting?

Answer 17

Time-consuming, resource-intensive, and potential short-term focus.

Question 18

What is activity-based budgeting (ABB)?

Answer 18

A budgeting approach that focuses on the costs associated with specific activities or tasks.

Question 19

What is performance-based budgeting (PBB)?

Answer 19

A: A method that links the allocation of funds to the achievement of specific performance targets.

Question 20

What is rolling budgeting?

Answer 20

A continuous budgeting technique where a new budget period is added as the current period ends.

Question 21

What is top-down budgeting?

Answer 21

Senior management sets overall budget targets and distributes them to departments.

Question 22

What is bottom-up budgeting?

Answer 22

Departments prepare their own budgets, which are consolidated into the overall company budget.

Question 23

What is envelope budgeting?

Answer 23

A personal finance technique where money is allocated to specific categories, and no further spending is allowed once the envelope is empty.

Question 24

What is capital budgeting?

Answer 24

A process used to evaluate long-term investments in assets like machinery, infrastructure, or buildings.

Question 25

What is budgetary control?

Answer 25

A financial management technique used to monitor actual performance against budgeted figures and take corrective actions.

Question 26

What are the key components of budgetary control?

Answer 26

Budget preparation, comparison of actual vs. budgeted performance, and corrective actions.