2.2.4 Budgets
Budgets Key Definitions Budget: A target for costs or revenue that a firm or department must aim to reach over a given period of time. Income Budget: This involves setting a minimum figure for the revenue to be generated by a product or service, a department, or a manager. Expenditure Budget: This involves setting a maximum figure for what a department or manager can spend over a given period of time in order to control costs. Historical Budgeting: This involves setting a budget for the upcoming year based on previous figures on revenue and expenditure. Zero Budgeting: This involves setting all future budgets to 0 in order to force managers to justify their spending levels. Criteria: The 'yardsticks' that success, or a lack of success, is measured against. Variance: The difference between the budgeted figure and the actual figure, this can be favourable or adverse depending on the budgets. Favourable Variance: A diffe...
