Budgeting

Question 1

Period budget

Answer 1

• Prepared for a set length of time (one year)
• Becomes a one-off excessive planned into the business cycle
• May be revised

Question 2

Continual or rolling

Answer 2

• Continually updated
• May be broken down into monthly periods

Question 3

Annual budget

Answer 3

• Prepared in advance for 1 year

Question 4

Rolling budget

Answer 4

• as each months elapses another month is added to the end of the budget

Question 5

Incremental budgeting

Answer 5

• uses the previous budget as a base, using inflation to increase expenditure e.g. 5% growth

Question 6

Zero-based budget

Answer 6

• ignores previous budgets in building new budget

Question 7

Functions of budgets

Answer 7

• Planning
• Coordination
• Communication
• Motivation
• Performance evaluation
• Authorisation of expenditure

Question 8

Sales variance

Answer 8

The difference between actual sales and budgeted sales