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Level 5 Management Accounting > Lecture 8 > Flashcards

Lecture 8 Flashcards

1
Q

What is a budgeting system

A

A budgeting system is a structured approach to managing and allocating financial resources to meet financial goals

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2
Q

What does a budgeting system provide

A

It provides a framework for tracking income, expenses, and savings, ensuring that financial goals are achieved while maintaining financial stability

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3
Q

What is the purpose of a budgeting system

A

Purpose of a budgeting system:
- Financial Control
- Goal Achievement
- Financial Planning
- Decision-Making
- Risk Management

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4
Q

How do budgeting systems help with financial control

A

Helps track income and expenses to ensure that spending does not exceed available funds

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5
Q

How do budgeting systems help with goal achievement

A

Supports short-term and long-term financial goals, such as saving for a vacation, paying off debt, or investing for retirement

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6
Q

How do budgeting systems help with financial planning

A

Facilitates the allocation of resources toward specific priorities and helps plan for future financial needs

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7
Q

How do budgeting systems help with decision making

A

Provides insights into spending patterns, allowing for informed decisions on adjustments to meet financial goals

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8
Q

How do budgeting systems help with risk management

A

Identifies areas where expenses can be reduced or where savings can be increased

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9
Q

What is the nature of a budgeting system

A

Nature of a Budgeting System:
- Systematic
- Flexible
- Continuous Process
- Personalized

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10
Q

How are budgeting systems systematic

A

Involves categorizing income and expenses, setting targets, and monitoring performance over time

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11
Q

How are budgeting systems flexible

A

Can be adjusted to reflect changes in income, expenses, or financial priorities

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12
Q

How are budgeting systems a continues process

A

Requires regular review and updating to ensure it remains aligned with financial objectives

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13
Q

How are budgeting systems personalised

A

Tailored to individual or organizational needs, reflecting unique income levels, expenses, and financial goals

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14
Q

How does a budgeting system help maintain financial health

A

budgeting system helps maintain financial health by ensuring that resources are allocated efficiently to meet both immediate and future financial needs

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15
Q

How does budgeting help with planning

A

Budgeting for Planning:
- Setting Financial Goals
- Resource Allocation
- Forecasting
- Prioritization

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16
Q

How does budgeting help with setting financial goals

A

Budgets help outline specific financial objectives, such as saving for a major purchase, investment, or reducing debt

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17
Q

How does budgeting help with recourse allocation

A

Allocates resources to different areas ensuring that funds are appropriately distributed to support business or personal goals

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18
Q

How does budgeting help with forecasting

A

Helps predict future income and expenses, enabling proactive decision-making and long-term financial planning

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19
Q

How does budgeting help with Prioritization

A

Assists in identifying which activities or projects are most critical, ensuring that resources are used where they can have the most impact

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20
Q

How does budgeting help with control

A

Budgeting for Control:
- Monitoring Performance
- Corrective Action
- Resource Management
- Financial Discipline

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21
Q

How does budgeting help with monitoring performance

A

Tracks actual financial performance against the budgeted figures, identifying discrepancies or variances

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22
Q

What is corrective action

A

When actual results deviate from the budget, steps can be taken to realign spending, adjust strategies, or allocate resources more efficiently

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23
Q

How can budgeting help with recourse management

A

Ensures that resources are utilized efficiently and effectively, avoiding overspending or underutilization of funds

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24
Q

How can budgeting help with financial discipline

A

Establishes a framework for maintaining control over finances by setting limits and boundaries for spending and investments

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25
Q

What is the purpose of operating budget

A

To forecast and manage day-to-day expenses and revenues over a specific period

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26
Q

What does operating budget include

A

Includes categories like salaries, materials, utilities, marketing, and other regular operational costs

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27
Q

How is operating budget used

A

Used to manage short-term financial performance

28
Q

What is the purpose of capital budget

A

Focuses on significant investments in assets, equipment, or infrastructure projects that typically have a long-term impact

29
Q

What does capital budget include

A

Includes major purchases such as machinery, buildings, or technology upgrades

30
Q

Where is capital budget used

A

Common in industries like real estate, manufacturing, or government where large capital expenditures are required

31
Q

What is the purpose of cash flow budget

A

Tracks the inflows and outflows of cash within a given period to ensure liquidity

32
Q

What does cash flow budget focus on

A

Focuses on cash receipts and payments, helping manage short-term financial health and liquidity

33
Q

Who is cash flow budget helpful for

A

Helpful for businesses or individuals who need to manage their cash positions to avoid liquidity shortages

34
Q

What is the purpose of budget variance budget

A

Focuses on identifying and managing differences between the planned budget and actual performance

35
Q

What does budget variance budget compare

A

Compares actual performance with the budgeted numbers to highlight variances and take corrective action

36
Q

Where is budget variance budget common

A

Common in financial reporting and management where ongoing adjustments are necessary

37
Q

What is a zero-based budget like

A

Starts from a “zero” base for each budget period, requiring all expenses and revenues to be justified from scratch, with no automatic carryovers

38
Q

What does zero-based budget focus on justifying

A

Focuses on justifying each line item, often used in cost-saving or restructuring initiatives

39
Q

Where is zero-based budgets often used

A

Often used in organizations looking to reduce costs or optimize spending by re-evaluating all budget items

40
Q

What is the purpose of the master budget

A

Integrates multiple budgets into a cohesive financial plan

41
Q

What s the contents of the master budget

A

Combines various individual budgets into a single comprehensive financial plan with a focus on coordination and alignment

42
Q

Where is the master budget typically used

A

Typically used by large businesses or corporations to streamline planning and management across departments

43
Q

What is the purpose of an expense budget

A

Focuses on controlling and managing specific expenses within a defined budgetary period

44
Q

What does an expense budget typically include

A

Typically includes areas like travel, entertainment, marketing, or training expenses

45
Q

How is expense budget used

A

Used by departments or teams to control spending within specific areas

46
Q

What is the purpose of profit budget

A

Focuses on projecting and managing profit by controlling revenues and expenses

47
Q

What is the contents of profit budget

A

Combines sales projections, operating expenses, and profit margin expectations

48
Q

Who is profit budget often used by

A

Often used by businesses aiming to maximize profitability and improve financial performance

49
Q

What is the expense or departmental budget purpose

A

Allocates funds specifically to departments or projects for managing resource allocation and performance monitoring within those areas

50
Q

What is the expense or departmental budget contents

A

Focuses on individual departmental expenditures, staffing, and operational needs

51
Q

What are some benefits of budgets

A

Here are some key benefits:
- Financial Control
- Goal Achievement
- Improved Financial Planning
- Resource Allocation

52
Q

What do budgets do for financial control

A

Provides a clear view of income and expenses, helping prevent overspending and ensuring that spending stays within available resources

53
Q

What is the impact of budgeting for financial control

A

Reduces the risk of debt accumulation and financial strain by promoting disciplined financial management

54
Q

How does budgeting help with goal achievement

A

Helps set realistic financial goals and outlines the steps needed to reach these objectives

55
Q

What’s the impact of budgeting for goal achievement

A

Encourages progress toward long-term and short-term financial aspirations

56
Q

How does budgeting help with improved financial planning

A

Facilitates better forecasting of future financial needs, ensuring adequate preparation for expenses

57
Q

What’s the impact of budgeting for improved financial planning

A

Enhances decision-making by providing a roadmap for managing finances proactively

58
Q

How does budgeting help with resource allocation

A

Ensures that funds are allocated efficiently across different areas

59
Q

What’s the impact of budgeting for resource allocation

A

Maximizes productivity and effectiveness by allocating resources where they are most needed

60
Q

How does operating budget contribute to the master budget

A

Provides detailed insights into projected revenues and operating expenses that feed into the overall financial picture

61
Q

How does capital budget contribute to the master budget

A

Helps integrate capital expenditures into the broader financial strategy by forecasting cash flows and funding sources

62
Q

How does cash flow budget contribute to the master budget

A

Ensures that all financial activities maintain adequate cash flow to support ongoing operations and capital investments

63
Q

How does expense budget contribute to the master budget

A

Provides a granular view of specific cost areas, ensuring the overall budget reflects detailed departmental needs

64
Q

How does revenue budget contribute to the master budget

A

Supplies the necessary revenue figures that balance against expenses in the master budget to achieve profitability targets

65
Q

What is the final output of the master budget

A

The master budget becomes the guiding financial document that integrates all smaller budgets into a cohesive financial strategy

Level 5 Management Accounting (12 decks)

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