2.2 Budgets Flashcards
(11 cards)
WHat is a budget
A budget is a finanicial plan for the future
What is an income budget
A set amount of revenue to be achieve in a time period
Whats an expenditure budget
A limit on how much should be spent in a time period
Whats a profit budget
The surplus between income and expenture in a period of time
Whats variance?
The difference between the budget and the actual value.
Whats a favourable (F) variance?
A variance where the actual figure did beter than the the budgeted figure. More profit made
Whats an adverse (A) variance
A variance where the budgeted figure did better than the actual figure. Less profit made
Difficulties of budgeting
Competition
Managers focusing on short term
Time and skill
Unachievable
What are the 2 types of budgets
Historical
Zero based
What a historical budget
Based on past data e.g. sales and costs of last year
WHats zero based?
Starts from zero and each spending needs to be justified
