• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Illustrate the use of budgets as a means of exercising financial control of a company

Extracts from this document...

Introduction

Transfer-Encoding: chunked A budget is an estimate of income and expenditure for a set period of time. This will allow or provide a particular amount of money. There are many advantages for a business to use a budget. Firstly, budgets are good to see where they are succeeding and where they may be failing. If a business do not have enough funds to meet budgeted targets they will need to follow their contingency plan. However a budget may be able to identify where they can save money before they need to follow their back up plan. This can be done especially if business decide to use zero-based budgets. This is because everyone in each department will have to justify why they need money, therefore business will be able to highlight the departments that who don?t need as much money as they may have been given in the past. However, budgets can also become a problem. ...read more.

Middle

Budgets need to be changed as circumstances change which means more effort and more time needs to be put into correcting the budgets. This will cost businesses more money and time used on this could have been used in other important areas. There are many different types of budgets. First there is sales budgets, this forecasts how much stock will be sold. There is also production budgets which forecast how much stock needs to be made. Additionally, purchases budgets outline the material requirements of production budget and labour budgets outline the labour requirements of production budget. Furthermore, there is capital expenditure budgets which summaries new assets that may be needed and cash budgets forecasts the money flowing in and out of the business. Lastly, there is master budgets which is a summary of all budgets to forecast profit and loss. ...read more.

Conclusion

However if they cannot reach break-even point then Nintendo may need to cut costs by finding cheaper raw materials or making some staff redundant. Nintendo may also need to raise the prices of their products. However they will need to ask them self?s if customers will be willing to pay a higher price and do research within competitors in order to higher their prices. From break-even analysis Nintendo will be able to see how changing costs and sale prices will affect how much they need to sell. They can see this by using a spreadsheet or chart which highlights clearly the break-even point. If the fixed costs increase Nintendo will need to sell more products to break-even. Whereas if fixed costs decrease they won?t have to sell as much. In addition, if Nintendo increase the selling price they will need to sell less however if they lower the price they will need to sell more to meet break-even. Unit 34 P6 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. Marked by a teacher

    In this assignment I will talk about why costs and budgets need to be ...

    3 star(s)

    The reasons for business having resulting in over-expenditure are incorrect data and inexperienced employees. The incorrect data will cause over-expenditure to occur as the business will think they have more money to spend than they actually have. The Over-expenditure can also be a result of inexperienced employees creating the wrong

  2. Free essay

    `Accounting as a discipline has no theory`. Critically evaluate this statement and provide examples ...

    The accountants had no theoretical backing. Accounting had evolved over time with few written and was in effect a collection of traditions, which were not necessarily understood. The development of conceptual framework was originally rejected by the UK but eventually more and more countries followed the idea of the USA.

  1. Budgets - An explanation of the use of budgets as a means of exercising ...

    Budgets A budget is like a plan that businesses make. They plan it on their predictions of what they think is going to happen for them in future months / years and is a estimate of expected income and expense for a a certain period in time.

  2. A2 Business CourseWork

    * Renewable energy sources: Tesco say that one way of reducing their carbon output is to generate their own energy from renewable, sustainable sources such as solar, wind, biomass and geothermal. They have decided to set aside �500 million to invest in these technologies over the next 5 years.

  1. Financial Ratio Analysis.

    Cash flow forecasts are easier to prepare, as well as more useful, than profit forecasts. vii. They can in some respects be audited more easily than accounts based on the accruals concept. viii. The accrual concept is confusing, and cash flows are more easily understood.

  2. Budgeting. By setting up a budget it will allow me to see the ...

    I have decided to buy all my products at the beginning of the month for the reason that I have a limited space inside my shop that can hold the supplies for example my fridge can only hold so much therefore by ordering on the first of the month, my

  1. In this assignment I will be explaining in detail the importance of cash flow, ...

    The ratio of the current assets divided by current liabilities is known as the current ratio. It represents a key liquidity measure of business solvency. Costs Direct / Variable cost Variable cost are cost that change due to the volume of output.

  2. Ratio Analysis. I am going to illustrate the financial state of Chester Private ...

    Debtors? days shows us how many days it will take the debtor to give back the money for purchasing goods on credit. Calculation for debtors? days (YEAR 2006): DEBTORS 45 X 365 (YEAR) = X 365 = 23.46 (24 days)

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work