Budgeting Flashcards
1
Q
Define budget
A
A (planned and agreed) financial plan detailing the inflows and outflows of capital over a period of time
2
Q
What is the difference between the Income, Expenditure and Profit budgets?
A
Income: Planned and agreed revenue
Expenditure: Planned and agreed spending
Profit: Planned and agreed profit over time
3
Q
What needs to be considered before setting a budget
A
Company objectives
Competitor spending
Turnover
4
Q
Why do businesses set budgets
A
- Establish priorities
- Gain financial support
- Avoid overspending
- Motivation
- Planning reference
5
Q
What are the problems with budget setting
A
- Depends on employee experience
- Involves guesses, so decisions must be thoughtful
- Unforeseen changes can occur
6
Q
What is budget variance
A
The difference between actual and budgeted amount
7
Q
What are the 2 types of variance
A
Adverse and Favourable — based on whether the difference is positive or negative
