Pages in this set

Page 1

Preview of page 1

Purpose of Budgeting

A budget is simply a financial plan for the forthcoming year, that is drawn up to help a business
achieve its objectives.

Budgets are often used to exert a degree of control over the costs of the business, in an attempt to
achieve gains in efficiency.…

Page 2

Preview of page 2
3. Setting unrealistic and unachievable budgets.
4. Sticking rigidly to the budget, (i.e. forgetting the fact that it is only a plan and a guide for the
next year, and consequently it can be changed accordingly).

Variance Analysis

It is vital that a business regularly reviews and revises its budgets.…

Page 3

Preview of page 3
This is a variance of £ 20,000 (or 10% of the budgeted figure). This is an unfavourable or adverse
variance (A), because it results in the business spending more money than it budgeted for.
Similarly, the business budgeted to spend £ 100,000 on its labour costs (wages and salaries). It…


No comments have yet been made

Similar Business resources:

See all Business resources »