Section 3 - 3.9 budgets

Question 1

A budget

Answer 1

Is a financial plan of expected revenue an expenditure for a department or an organization for a given period of time

Question 2

Budgetary control

Answer 2

Refers to the use of corrective measures taken to ensure that actual outcomes equal the budgeted outcomes, by systematic monitoring of budgets and investigating the reasons for any variance

Question 3

Contingency fund

Answer 3

Is a reserve budget that is set aside for emergency and back up use

Question 4

A cost center

Answer 4

Is a department or unit of a business that incurs costs but is not involved in making any profit. These costs are clearly attributed to the activities of that department e.g. salaries, wages, lighting, components and capital expenditure

Question 5

The master budget

Answer 5

Is the overall or consolidated budget, comprised of all separate budgets. The chief financial officer has general control and management of the master budget

Question 6

A profit center

Answer 6

Is a department or unit of a business that encose both costs and revenues. Profit sent tend to be used by large diversified businesses that have abroad products mix

Question 7

SMART budgets

Answer 7

Are specific, Measurable, agreed, realistic and time constraint. This helps to ensure that budgets are appropriately sat in order to facilitate budgetary control

Question 8

Variance

Answer 8

Refers to any discrepancy between actual outcomes and budgeted outcomes. Favorable variance means the variance is beneficial for the business. The opposite is true for adverse variances