Chapter 30, Budgets and variance Flashcards Preview

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Flashcards in Chapter 30, Budgets and variance Deck (8):

Reasons for budgeting

- measuring money entering and leaving the business
- giving information on the productivity levels of the business
- providing information for shareholders
- ensuring cash flow is adequate to meet day to day needs
- strategic perspective


Overdraft facility

an agreement with the bank to be able to withdraw from an account up to a stated limit


reasons for Cashflow information

- need for liquidity
- improving liquidity
- Dealing with banks or other lenders
- Making changes



the passing on of responsibility, usually to someone at a lower level in the organisation


Zero Budgeting

sets all budgets at zero and requires managers to justify any requirements for funds. This ensures money is only used where there is need


Flexible Budgets

allows a business to make allowances for changes in the level of sales volume so that adverse variances are avoided


Variance Analysis

the difference between the actual financial results for an item and the amount in the budget. Variance can be adverse or favourable.


Historic information

information that already exists from past years