AS Business Studies: Budgeting

Hey, here are some revision notes mainly for people taking the AQA AS Business Studies Unit 1 exam, but can be used for other exam boards too. I hope this helps you to revise! Please rate and comment on how to improve :D

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  • Created on: 18-11-10 14:14
Preview of AS Business Studies: Budgeting

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Setting Budgets Candidates should be aware of
· income, expenditure and the reasons for setting budgets
profit budgets and the problems in so doing.
· the process of setting budgets Candidates should be able to
· problems in setting budgets. amend or complete a budget.…read more

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A budget = A financial plan for the future concerning the revenues and costs of a
Setting budgets is a key part of management and financial control for a start-up
Budgeting is:
­ A part of business planning
­ About allocating limited resources
­ Used to monitor performance and take corrective action
What makes an effective budget
1. Estimate sales reasonably accurately
­ Not too optimistic
­ Base on market research if possible
2.…read more

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Sales Budget
· Putting a sales budget together is often hard for a start-up
­ Perhaps no experience of the market
­ No existing customers or sales history
­ Have to predict sales volumes and prices
· Sales budget needs to take account of market research
­ Realistic view on sales volumes and prices
­ Assumptions made about the timing of sales and which channels they
will come from (e.g.…read more

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Expenditure Budget
The expenditure budget is a vital part of planning a start-up because:
­ Business likely to incur costs before it starts trading
­ Need to ensure it has sufficient cash to pay for the costs
­ Poor control of costs may lead to business failure
Ideally, the expenditure budget is prepared in as much detail as possible
Overall objective ­ needs to be complete and prudent
­ Prudent
· Budget should make sensible, cautious assumptions
· Don't be too optimistic on sales; allow…read more

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Expenditure Budget
Here is an example of an expenditure budget…read more

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Profit Budget…read more

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Methods of Setting a
Remember that we are dealing with start-ups in BUSS1
­ Entrepreneur has many other things to do
­ Limited time and resources
­ Not possible to look at what happened last year!
Budget should be integrated with overall process of business planning
Tips for a start-up budget
­ Make use of "rules of thumb" ­ e.g.…read more

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Disadvantages of Budgets
Budgets are based on estimates and assumptions ­ actual results always turn out
Start-ups have no trading history
Setting and monitoring budgets takes time ­ it shouldn't get in the way of building
the business
Limited motivational effect, particularly if the start-up doesn't have any employees
Managers with delegated authority may try to persuade their bosses to set
spending budgets higher than they really need to be.…read more

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Exam Tips
Remember that, for the start-up entrepreneur, the time spent setting and
monitoring budgets has an opportunity cost. Three days working on a budget
spreadsheet could be spent instead on visiting customers, training staff or
developing new product ideas.
As a result, an effective budget system for a start-up is likely to be pretty simple -
often nothing more than a single spreadsheet.…read more


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