Unit 33 - Budgeting Flashcards
Def: budget
A quantitative economic plan prepared and agreed in advance
Def: budgetary control
A business system that involves making future plans comparing the actual results with the planned results and investigating the cause of any difference
Def: historical figures
Quantitative information based on past trading records
Def: production cost budget
A firms plant production cost for a future period of time
Def: sales budget
A firms plant sales for a future period of time can be measured in terms of volume or revenue
Def: variance
The difference between actual financial outcomes and those budgeted
Def: variance analysis
The process of calculating variance and attempting to identify their causes
Def: zero based budgeting/zero budgeting
A system of budgeting where no money is allocated or for costs or spending unless they can be justified by their fund holder
Purpose of budgeting
Planning
Coordination
Communication
Efficiency
Motivation
What are the two kinds of variances?
Favourable and adverse
Difficulties of budget
Setting budget
Motivation
Manipulation
Rigidity
Short termism
