Budgeting Flashcards
1
Q
What is a budget?
A
prediction or limit of how much a business is spending.
- also predicts how much money a business will receive.
account for money a business saves or borrows.
2
Q
What is expenditure budget?
A
- predicts how much money a business will spend over a period of time.
- includes everything a business needs to spend money on such as machinery, office rent and electricity.
- set limits on spending to make sure that a business is not overspending.
3
Q
What is revenue budgets?
A
- how much money will come into a business from revenue over a period of time.
- business will estimate how much it will sell and how much it will receive from total sales.
- businesses might use previous sales figures and market research to decide how many to sell.
4
Q
Planning ahead…
A
- advertising campaign may cause both sales and spendings to increase.
- competition from rival businesses may cause drop in sales.
5
Q
Advantages of budgeting:
A
- prevent businesses from spending more than it earns.
- predict how much in each department a business will spend. If department is spending more than it should, managers know where they need to cut expenses.
- Managers can compare budget to actual expenditure and make improvements to next years budgets.
6
Q
What is budgetary control?
A
When budgeted figures are compared with actual figures.
Difference between these figures = variance
7
Q
How does budgetary control help a business?
A
helps a business work out why there is a variance.
8
Q
What is suggested in a business has more money than budgeted?
A
- advertising has been successful
- production has been more effective
- costs have decreased
- competitors are selling less.
9
Q
What is suggested if a business has less money than budgeted?
A
- advertising has been less successful
- problems with production
- costs have increased
- competitors are selling more.
