Using budgets

  • Created by: Montae
  • Created on: 26-03-15 15:16

What is a budget?

A financial plan for the future conmcerning the revenues and costs of a business.

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What are variances?

A variance arises when there is a difference between actual and busget figures.

Favourable Variance

Is when the actual figure is better than budgeted figure.

-E.g costs lower than expected 

Adverse Variance 

Is when the actual figure is worse than the budgetted figure 

-E.g costs higher than expected

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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
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