Chapter 17 - Budgeting

Question 1

Budgeting definition

Answer 1

the process of predicting/estimating the financial consequences of future events

Question 2

What are two key differences between the actual reports and the budgeted ones

Answer 2

-Budgeted reports future events rather than historical ones
- As a consequence, budgets use estimates or predictions rather than actual, verifiable data

Question 3

What is the budgeting process

Answer 3

Budgeting reports are prepared, then actual reports are prepared, then variance reports are prepared, then decisions are made to improve business performance.

Question 4

What are the 3 steps in account reconstuction

Answer 4

1. Identify the entries which would be expected in a particular ledger account
2. Match these entries with figures that are known
3. Complete these ledger accounts to calculate the figures that are not known

Question 5

Variance Definition

Answer 5

the difference between actual and budgeted figures, usually described as favorable or unfavorable