Budgets and Budgetary Control Flashcards
What is a revenue budget?
This identifies SALES TARGETS and therefore REVENUE
How do you calculate revenue?
number of sales X price per unit
What is an expenditure budget?
This budget sets SPENDING TARGETS
What is budgeting used for?
It’s another financial planning tool that helps businesses to plan for success by SETTING SALES TARGETS and IDENTIFYING AND LIMITING EXPENDITURE.
What will an established business use to help set a budget?
Last year’s revenue and expenditure budget.
How will a new business set an expenditure budget?
It will have to list all of its possible items of expenditure.
What is a benefit to preparing a budget?
It will identify all expenditure and revenue. It will allow a business to see if expenditure is going to be TOO HIGH and they can then take action to REDUCE this before making a LOSS.
What is a contingency fund?
Money set aside to cope with an emergency such as a car repair or a machine break down.
What is budgetary control?
It means checking performance to make sure that targets are met and are within budget.
What is it important to check spending?
Rising costs could be reduced if possible and if there is regular overspending this MUST be investigated to find out the reasons for it.
If a budget is set what action should be taken to control the budget?
It should be checked each month to ensure that planned revenue and expenditure targets are being met.
If an extra £50 has to be spent on insurance how will this affect a budget?
It will mean an overspend and targets will not be met.
Why is budgetary control important?
It is important to make sure that a business makes a profit. If a budget is not controlled the owner will not know if costs are rising or sales are too low. If overspends continue the business could go bankrupt.
When can budgets be revised?
If the targets set are too ambitious.
