Budgets, Flex Budgets, and Variances

Flashcards focused on key terms and definitions related to budgeting, variances, and financial management.

Budget

A quantitative expression of a proposed plan of action by management for a specified period, including both financial and non-financial aspects.

Rolling Budgets

Budgets that are continually updated so that the organization is always looking a year or six months into the future.

Zero-Based Budgeting

A budgeting approach that starts from a 'zero base', with no reference to prior budgets, requiring justification for all expenses.

Budgetary Slack

The practice of intentionally overstating budgeted expenses or understating revenues to achieve targets more easily.

Flexible Budget

A budget that adapts based on actual activity levels, depicting what the master budget would have looked like had accurate estimations been made.

Variance Analysis

The process of comparing actual activity and resource consumption to expected amounts, often used to evaluate performance.

Activity-Based Budgeting

A budgeting method that bases expenses on actual activities required for production or services.

Master Budget

An aggregate representation of the firm's expected activity over some future time period, using a single activity level for sales and production.

Cost Center

A department or function within an organization that does not directly generate revenue but incurs costs.

Profit Center

A branch or division of a company that is responsible for generating revenue and managing its own costs for profitability.

Financial Budget

A budget that outlines the financial goals of an organization, including revenues, expenses, and cash flows.

Standard Costing

A costing method used to compare the expected costs of production with the actual costs incurred.

Static Budget

A budget that remains unchanged regardless of variations in activity level.

Capital Budget

A budget used to plan for significant investments in major assets or projects.