Finance And Accounting-Budgetary Control Flashcards
How is a budget drawn up?
Looking at past and present figures and trying to predict future needs
What is zero budgeting?
Budgeting that starts afresh each yeah
What are 2 reasons why budgeting is good
Helps managers efficiently and allocate resources
Provides a way of allocating responsibility among employees
What is a variance
The difference between the planned values and actual values
What are the 2 types of variances
Positive and negative
What is positive variance
Figures are less than planned e.g. Selling more or lower costs
FAVOURABLE
What is negative variance
Figures more than planned e.g. Selling fewer or higher costs
ADVERSE
What is a budget?
A targeted amount of cost/revenue that the company will hope to achieve
how is setting a budget and motivation linked?
budget is a form on non-financial motivator
it provides a focus and sense of achievement when reached
it encourages employees to contribute towards overall profitability
what are 5 internal factors that could cause variance?
improved efficiency over-estimate production methods under-estimate the cost of making products change in selling price poor communication
what are 5 external factors that could cause variance?
competitor behaviour changing fashions change in economy minimum wage new policy
what are 4 problems with budgets?
may not allow for change
no control over external factors
may lead to de-motivation of staff
poor quality information provided
3reasons why a budget must be controlled?
ensure that the company has enough working capital
control their spending and make sure its efficient
make sure their is an appropriate reserve of cash for emergencies
what is a sales budget/
a breakdown of how many products a business aims to sell and how much revenue it will get from those sales
what is a marketing budget?
describes how a business intends to achieve budgeted sales e.g. how much advertising
