TERMS Unit 3: Finance and accounts Chapter 21: Budgets HL

budget

a detailed financial plan for the future

cost centre

a section of a business, such as a department, to which costs can be allocated or charged

profit centre

a section of a business to which both costs and revenues can be allocated

delegated budgets

control over budgets is given to less-senior management

incremental budgeting

uses last year's budget as a basis and an adjustment is made for the coming year

zero budgeting

setting budgets to zero each year and budget holders have to argue their case to receive any finance

variance analysis

the process of investigating any differences between budgeted figures and actual figures

variance

difference between a budget and actual performance

favorable variance

exists when the difference between the budgeted and actual figures leads to a higher than expected profit

adverse variance

exists when the difference between the budgeted and actual figures leads to a lower than expected profit