Podcast
Questions and Answers
What is one of the primary functions of a budget in a business?
What is one of the primary functions of a budget in a business?
Which of the following is NOT considered a cash inflow in a cash budget?
Which of the following is NOT considered a cash inflow in a cash budget?
What is the final step in the format of a cash budget?
What is the final step in the format of a cash budget?
What do production budgets primarily show?
What do production budgets primarily show?
Signup and view all the answers
Which aspect of budgeting is focused on the monitoring of actual results against what was planned?
Which aspect of budgeting is focused on the monitoring of actual results against what was planned?
Signup and view all the answers
In preparing a cash budget, what needs to be added to the net cash inflow/outflow?
In preparing a cash budget, what needs to be added to the net cash inflow/outflow?
Signup and view all the answers
What is a common item found in cash outflows?
What is a common item found in cash outflows?
Signup and view all the answers
Why is establishing a system of control through budgeting important?
Why is establishing a system of control through budgeting important?
Signup and view all the answers
Study Notes
Functions of a Budget
- A budget is an essential part of business planning.
- Budgets help businesses to:
- Plan for the future
- Quantify goals
- Coordinate different departments
- Communicate goals and plans to the whole organization
- Motivate employees
- Establish a system of control
Cash Budget
- A cash budget tracks the flow of cash into and out of a business over a period of time.
- Components of a Cash Budget:
-
Cash Inflows
- Cash sales receipts
- Receipts from credit sales (trade receivables)
- Receipts from sale of assets
- Loan proceeds
- Issue of shares
- Receipt of government grants
-
Cash Outflows
- Cash purchases
- Payments to suppliers for purchases made on credit
- Payments for expenses (e.g., wages, electricity, stationery, rent, rates, insurance)
- Purchase of Assets
- Loan Repayment
-
Cash Inflows
Preparing a Cash Budget
- Focuses on the flow of cash in a specific period, regardless of when revenue or expenses are recognized in the Statement of Profit and Loss Account.
Production, Material Usage, and Material Purchases Budgets
- Production Budgets establish the amount of finished product needed.
- Material Usage Budgets determine the amount of raw materials needed for achieving production goals.
- Material Purchases Budgets determine how much material should be purchased.
Control Aspects of Budgeting
- Budgeting quantifies future plans for the business.
- A key aspect of budgeting is monitoring actual results against budgeted results, identifying differences, and analyzing their causes.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz explores the essential functions of a budget in business planning, detailing how it helps in setting goals and coordinating departments. Additionally, it covers the components of a cash budget, including cash inflows and outflows, which are crucial for tracking financial health.
