Budgets

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What is a budget?
Agreed plans of action over a given period of time, eg 12 months, expressed in numerical terms.
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4 benefits of budgets
1. aid middle management motivation, 2. allows delegation without loss of control. 3. control income and expenditure. 4. Provides overall direction and control
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3 problems of budgets
Accuracy, Time, Conflict
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What is zero-based budgeting?
At the start of the budgeting period, the budget is set at zero and budget holders have to justify why they need an amount.
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What is sales based budgeting?
This is where expenditure on activities is allocated in proportion to sales. So if sales increase, the budget allocated will increase.
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What is budgetary control?
This involves comparing budgeted with actual figures and analysis of the variance.
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What is variance?
The difference between the budgeted and actual figures.
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When does a positive variance occur?
When actual profits are higher than budgeted OR when actual costs are lower than budgeted.
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When does a negative variance occur?
When actual costs are higher than budgeted or when actual profit is lower than budgeted.
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What factors may influence variance?
Profit, telephone, electricity, office staff, sales, materials, labour
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Other cards in this set

Card 2

Front

4 benefits of budgets

Back

1. aid middle management motivation, 2. allows delegation without loss of control. 3. control income and expenditure. 4. Provides overall direction and control

Card 3

Front

3 problems of budgets

Back

Preview of the front of card 3

Card 4

Front

What is zero-based budgeting?

Back

Preview of the front of card 4

Card 5

Front

What is sales based budgeting?

Back

Preview of the front of card 5
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