unit 19: budgets Flashcards
(7 cards)
1
Q
define a budget
A
- short-term financial plan used as a guide to achieve the predetermined targets.
- a comprehensive and coordinated plan, expressed in financial terms, for the operations and resources of an enterprise for some specific period in the future
2
Q
explain the uses of the budget
A
- to control income and expenditure
- to establish priorities and set targets
- provide direction and coordination so business objectives can be tunred into practical reality
- assign responsibitlies to budget holders (managers) and control resources
3
Q
explain the control function of budgets
A
- budgetary control is the means by which management exercises control over the business plans
- also the financial terminology for managing income and expenditure
- in practice, it means regularly comparing ctual income or expenditure to planned income or expenditure to identify whether or not corrective measuer is required
4
Q
list advantages of budgetary control
A
- management can compare if the actual performance is line with what is reflected in the budget
- corrective measure can be taken if there were a lot of deviations from the budget
- possible cash flow problems can be looked at and avoided
- improves the allocation of scarce resources
- motivates employees by participating in the setting of budgets
5
Q
explain the prupose of a sales budget
A
- sales budget= a financial plan which shows how resources should be allocated to achieve forecasted sales
purpose - to plan for maximum utilization of resources and forecast sales
- MO: it’s a detailed schedule used to show the xpected sales for the coming months
- enables the business to plan on how customer demands can be met based on past sales info.
6
Q
define a cash budget
A
a company’s estimation of cash inflows and outflows
7
Q
list for transactions that aren’t a flow of funds, therefore shouldn’t be entered in a cash budgtet
A
- depreciation
- cash or trade discount
- bad debts
- profit or loss on sale of asset
