Budgeting Key Terms

Question 1

Budget

Answer 1

A quantitive economic plan prepared and agreed in advance

Question 2

Budgetary control

Answer 2

A business system that involves making future plans, comparing the actual results with the planned results and then investigating the causes of any differences

Question 3

Historical Figures

Answer 3

Quantitative information based on past trading records

Question 4

Production Cost Budget

Answer 4

A firms planned production costs for a future period of time

Question 5

Sales Budget

Answer 5

A firms planned sales for a future period of time - can be measured in terms of volume or revenue

Question 6

Variance

Answer 6

The difference between actual financial outcomes and those budgeted

Question 7

Variance Analysis

Answer 7

The process of calculating variances and attempting to identify their causes

Question 8

Zero Based Budgeting/ Zero Budgeting

Answer 8

A system of budgeting where no money is allocated for costs or spending unless they can be justified by the fund holder (they are given a zero value)

Question 9

Adverse Variance

Answer 9

When the actual figure is worse than the budgeted figure

Question 10

Favourable Variance

Answer 10

When the actual figure is better than the budgeted figure