2.2.4 budgets Flashcards Preview

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Flashcards in 2.2.4 budgets Deck (9)
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1
Q

what are budgets?

A

a budget is a detailed plan of income and expenses over a certain period of time

2
Q

what is the purpose of setting a budget?

A
  • ensure efficiency in spending

- helps a business achieve its financial and wider objectives

3
Q

budgets can be…

A

budgets can be either income budgets(revenue and earnings) or expenditure budgets

4
Q

what are the two types of budgets?

A

historical and zero-based budgeting

5
Q

what is historical budgeting?

A
  • setting budgets based on previous years and adjusted based on estimations
6
Q

what is zero-based budgeting?

A
  • any spending has to be justified with the budget holder. it can be time-consuming but is flexible and can reduce waste
7
Q

what is variance?

A

compares the actual figures to what’s been budgeted

8
Q

what can cause variances?

A
  • changes in economy
  • action of competitors
  • action of suppliers
  • internal inefficiency
9
Q

what are the difficulties of budgeting?

A
  • costs are subject to change
  • action of competitors are unknown
  • can be biased
  • managers may lack experience