Budgets Flashcards
What are budgets
financial plans that are prepared by an organisation to plan for expected income and expenses in budgeting period
how do we prepare budgets
top down or bottom up approach
differentiate between static budgets and flexibe budgets
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 .
differentiate between zero based budget and incremental budget
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 .
what budgets can be prepared for
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 .