Podcast
Questions and Answers
What is the primary function of the finance department in a business?
What is the primary function of the finance department in a business?
- Managing all aspects of the business's accounting (correct)
- Production and inventory control
- Human resource management and recruitment
- Sales and marketing strategy development
What are budgets primarily used for?
What are budgets primarily used for?
- Forecasting and planning future finances (correct)
- Managing customer relationships and building brand loyalty
- Determining the company's overall mission and goals
- Tracking past financial performance only
Which of the following is NOT a type of budget commonly used in businesses?
Which of the following is NOT a type of budget commonly used in businesses?
- Marketing budget
- Production budget
- Sales budget
- Employee budget (correct)
What is the purpose of comparing budgeted expenses to actual expenses in a variance analysis?
What is the purpose of comparing budgeted expenses to actual expenses in a variance analysis?
What is the key difference between a budget and a forecast?
What is the key difference between a budget and a forecast?
What is a key feature of income budgets?
What is a key feature of income budgets?
How are expenditure budgets split?
How are expenditure budgets split?
What is the core purpose of setting profit budgets?
What is the core purpose of setting profit budgets?
Which of these is a step in the budget-setting process?
Which of these is a step in the budget-setting process?
According to the sample budget provided, what is the predicted profit for February?
According to the sample budget provided, what is the predicted profit for February?
What can be considered a potential challenge when setting budgets?
What can be considered a potential challenge when setting budgets?
What is a potential benefit of setting budgets?
What is a potential benefit of setting budgets?
Which of these is NOT a potential drawback of setting budgets?
Which of these is NOT a potential drawback of setting budgets?
Flashcards
Budget
Budget
A plan for managing finances, forecasting income and expenses.
Finance Department
Finance Department
The division responsible for all accounting functions in a business.
Income Budget
Income Budget
A forecast of the expected revenue for a specific period.
Expenditure Budget
Expenditure Budget
Signup and view all the flashcards
Cash Flow Forecasting
Cash Flow Forecasting
Signup and view all the flashcards
Profit Budget
Profit Budget
Signup and view all the flashcards
Setting Budgets Process
Setting Budgets Process
Signup and view all the flashcards
Market Research
Market Research
Signup and view all the flashcards
Cash Flow Forecast
Cash Flow Forecast
Signup and view all the flashcards
Monitoring Budgets
Monitoring Budgets
Signup and view all the flashcards
Drawbacks of Budgets
Drawbacks of Budgets
Signup and view all the flashcards
Study Notes
Autumn 2024 Budget Spending
- The total budget is £118.1 billion
- Transport: £20.5bn
- Defence: £18.9bn
- Education: £7.1bn
- Housing and Communities: £12.6bn
- Science, Innovation, and Technology: £13.9bn
- Health and Social Care: £8.2bn
- Energy Security and Net Zero: £6.1bn
- Block grants to devolved governments: £10.3bn
- Other: £20.5bn
Budgeting Process
- Setting Objectives: Start by clearly defining goals.
- Market Research: Gather data about the market to inform the budget.
- Sales Forecast: Predict future sales based on market research.
- Set Income Budget: Establish the desired revenue for a period.
- Set Divisional Targets: Assign financial targets to different parts of the business.
- Set Profit Budget: Determine the anticipated profit for the period, based on income and expenditure.
- Set Expenditure Budget: Set the amount to be spent for the period.
- Review Against Objective: Compare actual results against the budget.
The Finance Department
- Responsible for all aspects of accounting, from record-keeping to final accounts.
- Tasks include budgets, cash flow forecasting, credit control, paying suppliers, and year-end account analysis.
Budgets
- Forecasts or plans for a business's finances.
- Can be for the whole business or specific functions (e.g., marketing).
- Types of budgets include:
- Income budget: Target revenue for a period.
- Expenditure budget: Limit on spending for a period.
- Profit budget: Target surplus between income and expenditure.
Problems in Setting Budgets
- Reliance on predictions and forecasts (which can be inaccurate).
- Costs are frequently subject to change.
- Actions of competitors can be unknown.
- Managers' experience and potential bias.
- Time and resources needed to build and monitor budgets.
Benefits of Setting Budgets
- Establishing measurable targets for outcomes, such as sales targets and efficiency.
- Guiding decision-making processes.
- Motivating budget holders through increased responsibility.
Budget Impacts on Stakeholders
- Managers are constrained by budgets to achieve goals.
- Other departments (e.g., marketing) are restricted.
- Suppliers may face negotiation pressures.
- Customers might experience price changes.
- Employees might see changes in work hours or staffing levels.
Sample Budget (Example)
- January: Income budget: £5,000; Expenditure budget: £2,500; Profit budget: £1,500
- February: Income budget: £6,000; Expenditure budget: £3,500; Profit budget: £2,500
- March: Income budget: £6,000; Expenditure budget: £3,500; Profit budget: £2,500
Wedding Budget Exercise
- Task 1: List the top 20 wedding items.
- Task 2: Assign a budget to each item.
- Task 3: Analyze the variance between average actual costs and budgeted costs, for each item.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
