Budgeting

Question 1

Define budget

Answer 1

A budget is a document that translates plans into money - money that will need to be spent to get your planned activities done (expenditure) and money that will need to be generated to cover the costs of getting the work done (income).

Question 2

Give benefits of budgeting

Answer 2

The budget tells you how much money you need to carry out your activities.

• Budgets act as a monitoring and controlling tool. By analyzing the manager can estimate where actual results are different from the budgeted results.
• It helps people to work towards a set target.

Question 3

Give limitations of budgeting

Answer 3

• Budgeting is a time consuming and costly job. The development of budget includes many repetitive steps before the budget is finally approved.
• Compared with its costs, budgeting provides little valuable, reliable and relevant information.
• Budgets are based on assumptions that often turn out to be inaccurate.

Question 4

How does incremental budget works

Answer 4

Figures are based on actual expenditure from last year, with a percentage added for an inflationary increase for next year

Question 5

How does zero based budget works

Answer 5

The budgeting process started from scratch with the proposed activities for the year