Budgetary MGT Qstns and Revisions

EXAMPLARY QUESTIONS/Revision
Best performance is usually achieve when a budget is considered as challenging but

achievable. Hofsteds analysis suggested that targets should be set at almost achievable
levels for maximum motivation and performance.
It is vital that the goals of management are in line with the goals of the organization, this is
known as goal congruence.
Budgetary management involves the planning, preparation, implementation, and

monitoring of an organization’s budget. It is the process of creating and managing financial
plans that help an organization to achieve its financial objectives.
The main objective of budgetary management is to allocate resources in an efficient and
effective manner and to ensure that the organization operates within its financial means.
The key elements of budgetary management include:
Planning: creating a detailed plan for the allocation of financial resources.

Preparation: developing a budget based on the organization’s financial goals and objectives.
Implementation: executing the budget as planned.
Monitoring: tracking the budget to ensure that it is being followed, identifying any
variances, and taking corrective action if necessary.
Reporting: providing regular reports to stakeholders to communicate the financial status of
the organization.
Effective budgetary management requires financial expertise, strong communication skills,

and a deep understanding of the organization’s operations and financial goals. It is a critical
component of organizational success and ensures that resources are allocated effectively to
support the overall mission of the organization
Forecasting Techniques:
Historical Data: A company can use past financial results as the basis for future projections.
This method helps establish patterns and identify trends as a starting point for forecasting.
Time-Series Analysis: It is a statistical method that uses historical data to identify patterns
and trends. This forecasting technique analyses trends over a specific period and makes
projections based on those patterns.
Regression Analysis: It helps identify the relationship between two or more variables. By
analysing past data, we can identify significant factors that influence company profitability
and use this knowledge to produce more accurate forecasts.
Types of Budget:
Operating Budget: This budget outlines revenue and expenses related to day to day
operations, such as salaries, rent, and supplies.
Capital Budget: This budget focuses on investments in long-term assets such as property,
equipment, or infrastructure.
Cash Budget: It provides a detailed analysis of the inflow and outflow of cash in an
organization.
Steps in Budget Preparation:
Setting Objectives: The budget should align with the organizations overall vision and
mission.
Collecting Data: It involves gathering information about past and present expenditures,
considering economic factors that may impact the budget.
Prioritizing: After collecting information, organizations must prioritize the items outlined in
the budget. This ensures that the budget aligns with the organization's objectives.
Drafting the Budget: Here, data is assembled, and the budget is drafted based on previous
steps.
Approval: The budget must be approved by relevant authorities before implementation.
Budget Analysis:
Variance Analysis: This analysis involves comparing actual expenses to budgeted expenses
and identifying the differences between the two.
Ratio Analysis: It involves comparing key financial ratios from previous years to determine if
the current budget is sustainable.
Trend Analysis: It helps identify changes in a company's financial position over time.
Conclusion: Budgetary management is a crucial aspect of an organization's financial

management. By forecasting accurately, budgeting effectively, implementing efficiently,
And analysing budgets regularly, businesses can make informed financial decisions and
achieve their objectives
QUESTION TYPES
1) Define budget and link it to budgetary management
2) Budgets typically have five aspects: name and explain the five aspects; Budgets
typically have five aspects:
Revenue: This is income from sales, investments or other sources. All income should be recorded in
the budget, and you should always note whether it’s pre- or post-tax income, so it’s easier for your
company’s accounting department to handle business taxes.
Operating expenses: Operating expenses are the costs associated with running the department or
business, such as machinery upkeep, rent and utilities. Some of these expenses are fixed, like
insurance and licensing fees, while others are variable, such as marketing or research and
development costs.
Capital expenses: These are capital investments in the department or business. Capital expenses can
take many forms, such as a new building or upgrades to an existing facility. Other forms include
patents on new products and the development of new technology such as phone apps.
Employee expenses: These expenses typically comprise a large part of company, department and
project management budgets. They include any expenditures related to staffing such as wages,
employment taxes and health plans.
Savings: Just because your department has some extra money to burn doesn’t mean you should
allocate it. Holding money back for unexpected expenses, especially when you have a surplus and
don’t work with a lose-it-or-use its business, can help you stay prepared for future events.
3) Budget management can be broken down into the following activities:

Budget planning, implementation, budget monitoring and controlling, budget reporting,
budget revision and auditing.
4) What are the key elements of budgetary management?

5) State and explain the 03 different forecasting techniques?
6) Explain the different steps in budget preparation
7) State and explain the different budget analysis method
8) Evaluate the advantages and challenges of using zero-based budgeting in
international companies. Take note.
9) In the classification of budgets, it is said flexible budgets are more useful than fixed
budgets. Is this statement true? And if true why? ans; This is a dynamic budget. In
comparison with a fixed budget, a flexible budget is one “which is designed to change in
relation to the level of activity attained.” An equally accurate use of the flexible budgets
is for the purposes of control.
Flexible budgeting has been developed with the objective of changing the budget
figures so that they may correspond with the actual output achieved. It is more
sensible and practical, because changes expected at different levels of activity are
given due consideration.
10) What do you understand by cash budget and what are the functions? ans; The
cash budget is a sketch of the business estimated cash inflows and outflows over a
specific period of time. Or It is a detailed projection of cash receipts from all sources
and cash payments for all purposes and the resultants cash balance during the
budget or It is a mechanism for controlling and coordinating the fiscal side of
business to ensure solvency and provides the basis for forecasting and financing
required to cover up any deficiency in cash.
 Functions; It makes sure that enough cash is available when it is required.
 It designates cash excesses and shortages so that steps may be taken in time to
invest any excess cash or to borrow funds to meet any shortages.
 It shows whether capital expenditure could be financed internally.
 It provides funds for standard growth.
 It provides a sound basis to manage cash position.
11) Cash budget practical exercise to be revised

12, in calculating the cash budget using the balance sheet method, what do we refer
to as the bank overdraft and what do we mean by bank balance? Ans; if assets side is
higher than liability side it would be the bank overdraft while liability side is higher
than assets side it gives bank balance.
 13) Evaluate the effectiveness of budget variances analysis in identifying areas of
improvement in international business operations.
 14) What are the essentials of a budget report?
 15) What do you understand by program budget?
16) What do we mean by budgetary control according to CIMA and its objectives?
“Budgetary control is the establishment of budgets relating to the
responsibilities of executives of a policy and the continuous
comparison of the actual with the budgeted results, either to secure
by individual action, the objective of the policy or to provide a basis
for its revision.”
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Typical questions/international finance aspect
 Discuss the main factors that influence the budgeting process in an international
business context.
 Explain the role of exchange rate fluctuations in the budgeting process for
international businesses.
 Evaluate the advantages and challenges of using zero-based budgeting in
international companies.
 Analyse the impact of political and economic instability in foreign countries on
budget planning for multinational corporations.
 Compare and contrast the challenges of budgeting for a single-country enterprise
versus a multi-national enterprise.
 Discuss the advantages and disadvantages of using a centralized or decentralized
approach when managing budgets across international operations.
 Assess the benefits and risks associated with using technology to support budget
planning and management in international organizations.
 Explain the importance of conducting sensitivity analysis in the budgeting process for
multinational companies operating in dynamic markets.
 Evaluate the effectiveness of budget variances analysis in identifying areas of
improvement in international business operations.
 Discuss the impact of cultural differences on budget planning and management in
international organizations.
Questions
How can a company create a budget that takes into account potential changes in the
business environment?
What information should be included in a budget, and how can you ensure that it is
accurate?
How can a budget be used to monitor and control expenses in a company?
What are some common budgeting techniques that companies use to effectively allocate
funds?
How can budgeting be used to improve the financial health of a company?
How can a company determine a suitable budget for a project, and how can it be adjusted if
necessary?
What are the advantages and disadvantages of different budgeting methods, such as cost-
volume-profit analysis and zero-based budgeting?
How can a company ensure that its budget is compliant with applicable legal and regulatory
requirements?
How can a company establish and maintain a budgeting process that is responsive to
changing business needs?
How can a company measure the success of its budgeting efforts, and what metrics should
be used to evaluate performance?

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EXAMPLARY QUESTIONS/Revision

Best performance is usually achieve when a budget is considered as challenging but

Budgetary management involves the planning, preparation, implementation, and

The key elements of budgetary management include:

Planning: creating a detailed plan for the allocation of financial resources.

Effective budgetary management requires financial expertise, strong communication skills,

Steps in Budget Preparation:

Conclusion: Budgetary management is a crucial aspect of an organization's financial

3) Budget management can be broken down into the following activities:

4) What are the key elements of budgetary management?

11) Cash budget practical exercise to be revised

Typical questions/international finance aspect

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