all about budgeting

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  • Created by: steph
  • Created on: 20-03-12 20:47

deffinition of budgeting.

 Establishing a planned level of expenditures, usually at a fairly detailed level. A company may plan and maintain a budget on a cash basis.

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+ They provide direction and coordination, ensures spending is geared towards the aim of the business.

+ motivate staff, encourages responsibility and recognising gain from meeting budgets. 

+ improve efficiency of a business.

+ can predict future, forecasting ability.

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- Difficult to monitor fairly, they must rely on the honesty of the budget holder.

- Allocations may be incorrect; unforeseen changes may mean the budget is not right.

- saving may not be seen an interest, saving money on other things to keep within a budget can be bad within the long run.

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budgets should...

Be consistent with the aims of a business and based upon the options of as many people as possible. Set challenging but realistic targets.

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varience analysis.

The process of which the outcomes of a budget are examined and compared with predicted figure so that reasons for changes are found.

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favourable variance.

when costs are lower than expected and revenue is higher than expected.

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adverse variance.

when costs are higher than expected or revenue is lower than expected.

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