a financial plan for the future concerning the revenues and costs of a business.
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What is the process of budgeting?
the process by which financial control is exercised in a business. Budgets for revenues and costs are prepared in advance and then compared with actual performance to establish any variances.
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Who are responsible for controllable costs and what do they do if the adverse variances are regarded as excessive?
managers are responsible for controllable costs within their budgets. Managers take remedial action if the adverse variances are regarded as excessive.
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What are the uses of budgets in management?
establish priorities & set targets, turn objectives into practical reality, provide direction and coordination, assign responsibilities, allocate resources, communicate targets, delegate without loss of control, motivate staff, improve efficiency.
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What are the principles of effective budgeting?
managerial responsibilities are clearly defined, managers have a responsibility to adhere to their budgets. performance is monitored against the budget. corrective action is taken if results differ significantly from the budget.
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What are the 2 main approaches to budgeting?
historical budgets and zero-based budgets.
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What's historical budgets?
last years figures are used as the basis for the budget. realistic as it is based on actual results. however, circumstances may have changed, e.g. new products, lost customers, credit crunch. does not encourage efficiency.
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What's zero-based budgets?
budgeted costs & revenues are set to zero. budget is based on new proposals for sales and costs
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Other cards in this set
Card 2
Front
What is the process of budgeting?
Back
the process by which financial control is exercised in a business. Budgets for revenues and costs are prepared in advance and then compared with actual performance to establish any variances.
Card 3
Front
Who are responsible for controllable costs and what do they do if the adverse variances are regarded as excessive?
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