Budgets

Question 1

What are budgets

Answer 1

financial plans that are prepared by an organisation to plan for expected income and expenses in budgeting period

Question 2

how do we prepare budgets

Answer 2

top down or bottom up approach

Question 3

differentiate between static budgets and flexibe budgets

Answer 3

static budgets are prepared for a set of activity for the period and no changes are made
flexible budgets are prepared fo a set of activity level and can be adjusted during the budget period for changes in the activity level .

Question 4

differentiate between zero based budget and incremental budget

Answer 4

zero based budget- all the amounts included in the budget are estimated from scartch and no reference is made to previous expenses or budgets
incremmental budget-the previous year;s budget or actua results are used as a basis to prepare the budget .

Question 5

what budgets can be prepared for

Answer 5

Master budgets include - budgeted financial statements ,cash flow budgets, capital expenditure budget ,operating budget which consists of 7 sales budget,production ,direct labour ,direct material ,purchasing ,staffing and adminstrative budgets .