Accounting · Study Guide
Key Points
Budgets set targets for income and expenditure to control spending and motivate managers
Flexible budgets adjust expected figures based on actual activity levels for fair variance analysis
Cash budgets forecast cash inflows and outflows to ensure sufficient liquidity
Exam Focus
Prepare budgets in correct format, calculate variances, and explain causes. Distinguish between budgeting for planning and budgeting for control.
Must-Know Terms
Cross-Theme Connections
An introduction to the role of the accountant in business
Budgeting is a core management accounting responsibility
Marginal costing
Marginal costing data informs flexible budgeting decisions
Standard costing and variance analysis
Variance analysis is used to control actual performance against standard costs