Topic 7 - Budgeting Flashcards
1
Q
Budgets
A
Financial plans for cost/revenues for a future period of time-based on a firms objectives
2
Q
Benefits of budgeting
A
Assists planning Communicates and coordinates Helps with decision making Monitors and controls Helps to motivate staff
3
Q
Limitations of budgeting
A
Benefits must not exceed cost Budget infor may not be accurate May demotivate staff May lead to disfunctional management Budgets may be set too low
4
Q
Types of budgets
A
Revenue budget Production budget Purchases budget Labour budget Trade payables budget Trade receivables budget Cash budget
5
Q
Master Budget
A
A summary f all the seven detailed functional budgets presented as an Income Statement
6
Q
Labour budget structure
A
Output Department (hours) @£x an hour Total hours Total cost
7
Q
What increases/decreases trade receivables
A
+ Credit Sales
- Payment received
- Discount allowed
- bad debts
8
Q
What increases/decreases trade payables
A
+ Credit Purchases
- Paying them
- Discount received
9
Q
Advantages of CASH budgets
A
They can identify in advance any cash surplus or deficits
The way that payments are planned might be changed to avoid the costs of overdrafts and other bank borrowings so that they coincide with periods of cash surpluses
