Cash budgeting Flashcards
1
Q
Budget
A
A plan explained in financial terms
2
Q
Objective of a budget
A
To make sure resources are used to the most optimal scenario
3
Q
Top-down vs bottom-up budget plans
A
Top-down - set by top management without involving staff
Bottom-up - all staff involved in setting the budget
4
Q
3 benefits of budgeting
A
Allows the company to prepare for future problems
Motivates employees
Variances can be identified and corrective action can be taken
5
Q
3 important formulas
A
COS = Opening stock + Purchases - Closing stock
Material usage = Opening stock + Production - Closing stock
Production/purchases = Material usage + Closing stock - Opening stock
6
Q
Cash budget formula
A
Inflows
Outflows
= Net inflows/outflows
+ Opening balance
= Closing balance
