What is a budget?
A financial plan for the future conmcerning the revenues and costs of a business.
What are variances?
A variance arises when there is a difference between actual and busget figures.
Is when the actual figure is better than budgeted figure.
-E.g costs lower than expected
Is when the actual figure is worse than the budgetted figure
-E.g costs higher than expected
What are the limitations of budgeting?
- can lead to inflexibility of decision-making
- Are only as good as the data being used
- need to be changed as circumstances change
- takes time to complete and manage
- Can result in short term decisions to keep within the budget