Chapter 10: Budgeting Flashcards Preview

Performance Management ACCA > Chapter 10: Budgeting > Flashcards

Flashcards in Chapter 10: Budgeting Deck (46)
Loading flashcards...
1

What purpose of a budget is described below?

A budgeting process forces a business to look to the future. This is essential for survival since it stops management from relying on ad hoc or poorly co-ordinated planning.

Planning

2

What purpose of a budget is described below?

Actual results are compared against the budget and action is taken as appropriate.

Control

3

What purpose of a budget is described below?

The budget is a formal communication channel that allows junior and senior managers to converse.

Communication

4

What purpose of a budget is described below?

The budget allows co-ordination of all parts of the business towards a common corporate goal.

Co-ordination

5

What purpose of a budget is described below?

Responsibility accounting divides the organisation into budget centres, each of which has a manager responsible for its performance. The budget may be used to evaluate the actions of a manager within the business in terms of the costs and revenues over which they have control.

Evaluation

6

What purpose of a budget is described below?

The budget may be used as a target for managers to aim for. Reward should be given for operating within or under budgeted levels of expenditure. This acts as a motivator for managers.

Motivation

7

What purpose of a budget is described below?

The budget acts as a formal method of authorisation to a manager for expenditure, hiring staff and the pursuit of plans contained within the budget.

Authorisation

8

What purpose of a budget is described below?

Managers may be involved in setting the budget. Extra responsibility may motivate the managers. Management involvement may also result in more realistic targets.

Delegation

9

What is a quantitative plan prepared for a specific time period. It is normally expressed in financial terms and prepared for one year.

Budget

10

A robust business plan/budget can often result in anticipating and avoiding what?

Disastrous outcomes

11

Without a budget, an organisation will be highly...

Inefficient and ineffective.

12

What kind of planning is long term, looks at the whole organisation and defines resource requirements.

Strategic

13

What kind of planning is medium term, looks at the department/divisional level and specifies how to use resources.

Tactical

14

What kind of planning is very short term, very detailed and is mainly concerned with control.

Operational

15

Budgets are necessary to convince banks and other lenders to do what?

Extend credit

16

What are Hopwood's three management styles?

-Budget constrained style
-Profit conscious style
-Non-accounting style

17

Which of Hopwoods three management styles performance are evaluated on the below?

-Manager evaluated on ability to achieve budget in the short term
-Manager will be criticised for poor results. For example, if spending exceeds the limit set

Budget constrained style

18

Which of Hopwoods three management styles performance are evaluated on the below?

-Manager evaluated on ability to reduce costs and increase profit in the long term
-For example, a manager will be prepared to exceed the budgetary limit in the short term if this will result in an increase in long term profit

Profit conscious style

19

Which of Hopwoods three management styles performance are evaluated on the below?

-Manager evaluated mainly on non-accounting performance indicators such as quality and customer satisfaction

Non-accounting style

20

Which of Hopwoods three management styles has the behavioral aspects below?

-Job related pressure
-May result in short-term decision making at the expense of long term goals Can result in poor working relations with colleagues

Budget constrained style

21

Which of Hopwoods three management styles has the behavioral aspects below?

- Less job related pressure
- Better working relations with colleagues
- Less manipulation of data

Profit conscious style

22

Which of Hopwoods three management styles has the behavioral aspects below?

-Similar to profit conscious style but there is less concern for accounting information
-Requires significant and stringent monitoring of performance against budget

Non-accounting style

23

What is a budget set at current achievable levels.

An expectations budget

24

What is a budget set at a level which exceeds the level currently achieved.

An aspirations budget

25

What type of budget is unlikely to motivate managers to improve but may give more accurate forecasts for resource planning, control and performance evaluation.

An expectations budget

26

What type of budget may motivate managers to improve if it is seen as attainable but may also result in an adverse variance if it is too difficult to achieve. This must be managed carefully.

An aspirations budget

27

A top down budget is also known as...

An imposed budget

28

A bottom up budget is also known as...

A participatory budget

29

What kind of budget is a budget allowance which is set without permitting the ultimate budget holder to have the opportunity to participate in the budgeting process

An imposed budget

30

What kind of budget is a budgeting system in which all budget holders are given the opportunity to participate in setting their own budgets'

A participatory budget