budgets

Question 1

what is a budget?

Answer 1

forecast/ plans for future finances of a business

Question 2

budgets can be…

Answer 2

• income
• expenditure
• profit

Question 3

what is an income budget?

Answer 3

a target set for the amount of revenue to be achieved in a set period of time

Question 4

what is an expenditure budget?

Answer 4

a limit placed on the amount to be spent in a given period of time

Question 5

what is a profit budget?

Answer 5

a target set for the surplus between income and expenditure in a given period of time

Question 6

what is a variance analysis used for?

Answer 6

the business may get early warning of adverse variances so they can out plans in place to stay within the budget as afar as possible

Question 7

what does it mean to refer to a budget as ‘adverse’?

Answer 7

when the actual results are worse than the budgeted results

Question 8

what does it mean to refer to a budget as ‘favourable’?

Answer 8

when the actual results are better than the budgeted result
i.e- sales of x
budgeted= 250
actual= 260
so the business is favourable by 10