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2.2.4 Budgets - Coggle Diagram
2.2.4 Budgets
Examples
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Overheads
Shows all planned indirect costs, such as insurance, rent and office wages
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Marketing
Shows planned spending on, for example, research, advertising, promotion, and sales
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Profit
Shows planned revenue, costs, and profit
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Master
Shows a summary of all budgets - including cost, revenue, and profit
Key Terms
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Budgetary control - A business system that invoves making future plans, comparing the actual results with the planned results and then investigating the causes of any differences
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Sales Budget - A firm planned sale's for a future period of time - can be measured in terms of volume and revenue
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Purpose
Control and Monitoring
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How successful a business has been in acheiving these targets can be found by comparing the actal results with the budget
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Co-ordination
Budgeting is one way in which managers can co-ordinated and control activities of the many areas of business
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Efficiency
Budgeting gives financial control to lower levels of management who are best able to make decisions at their point within the organisation
Motivation
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Improving on the budget position is an indication on the budget position is an indication of success for a department or group of workers
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Historical Budgeting
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However, circumstances may have changed (e.g. new products, lost customers)
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What is a budget?
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It must be a plan and not a forecast - a forecast is a prediction of what might happen in the future, whereas a budget is a planned outcome that the firm hopes to achieve
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