Budgets

Question 1

What is a budget?

Answer 1

A budget is a road map for future income and expenses.

Question 2

Who needs a budget?

Answer 2

Anyone who receives a monthly income or is involved in the finances of a business needs a budget to plan ahead and map out a route for the financial future of the business.

Question 3

What is the origin of the word “budget”?

Answer 3

The word budget comes from a French word “bougette” which means purse

Question 4

What are the purposes of budgeting?

Answer 4

The purposes of budgeting are

1) To draft a plan of revenue and expenditure, budget allocations to be made according to priorities.

2) To help individuals and businesses live within their means.

3) Monthly measurement of actual expenditure and revenue vs the plan so adjustments can be made during the year.

4) Help prepare for both planned and unplanned expenses, and to put away funds or pay off debt.

Question 5

What are the three main factors in a budget?

Answer 5

1) All expected income and expenditure must be listed.

2) Budget must be based on fact and experience by looking at past income and expenditure.

3) Budget must be realistic.

Question 6

What is the definition of “restriction”?

Answer 6

Restriction is something that limits or controls something else.

Question 7

Define “expenditure”.

Answer 7

Expenditure is an amount of money spent on expenses and buying assets for the business.

Question 8

What is “revenue”?

Answer 8

Revenue is money that comes into a business from the sale of goods or services.

All Income.

Question 9

Explain “Irregular expenditure”.

Answer 9

Irregular expenditure refers to unexpected costs that need to be anticipated and planned for.

Question 10

Why is it essential to have a personal budget?

Answer 10

It puts you in control of your money, helps you set goals, and inspires a culture of planning and saving.

Question 11

Why can a saving be considered an investment in your future?

Answer 11

A saving is an investment in your future because it ensures financial security and preparedness for unforeseen circumstances or planned future goals.

Question 12

Who normally compiles the accounts for a business?

Answer 12

Someone well informed about the finances of the business such as a committee, treasurer, director, owner, etc.

Question 13

What is an independent auditor?

Answer 13

Someone external to the business who impartially audits or checks that the finances are accurate and compiles them for the business.

Question 14

Why is a budget so important for businesses?

Answer 14

A budget is essential in the planning of the business, indicating the expected income and expenditure.

It helps in

setting limits,
making realistic goals,
identifying problems, and
ensuring funds are available for different tasks and allocating according to priorities.

Question 15

What is the difference between income and expenditure?

Answer 15

Income is the money a business makes from selling goods or services, while expenditure is all the costs of running the business.

Question 16

Define “Surplus” and “Deficit”.

Answer 16

Surplus: When more money comes into a business than is spent. Deficit: When more money is spent than what comes in.

Question 16

What is an audit?

Answer 16

An audit is a formal examination, correction, and official endorsing of financial accounts, especially those of a business, done by an accountant called an auditor.

Question 17

List examples of business expenditure.

Answer 17

1) Asset costs (vehicles, property, computers),
2) running costs (rent, petrol, telephone accounts),
3) staff costs (salaries), and
4) operational costs (printing, research, advertising).

Question 18

Why are saving, planning, and buying interlinking concepts?

Answer 18

Saving provides the necessary funds, planning ensures effective use of these funds, and buying is the execution of the plan using the saved funds.

Question 19

Why is saving essential in a country’s economy?

Answer 19

Saving money in banks is vital for economic growth because banks can then lend that money to entrepreneurs to generate income, spurring economic activity.

Question 20

Define “accessible”, “transparency”, and “accountability”.

Answer 20

Accessible: Able to be reached or obtained easily. Transparency: Clear, simple, easy to follow. Accountability: Being responsible for someone or something.

Question 21

What are the activities of a business?

Answer 21

The activities of a business are buying, producing, and selling.

Question 22

What financial outcomes can a business show?

Answer 22

A business can show a profit, show a loss, or break even.