2.2.3 Break-even & 2.2.4 Budgets GapFill

A budget can be defined as    a report an estimate an idea an appraisal  of income or expenditure, usually over a period of 1 year.

If the actual amount of expenditure is better than expected, this is called a   lucky profitable favourable sufficient variance.

If the actual amount of income is worse than expected, this is called an adverse   estimator density divergent variance . 

Budgets fall into two main categories:   modern narrative letter historical  and zero-based.

HISTORICAL BUDGET

This is a budget set for the business using current   overdraft money loan financial  figures and based on historical performance of the business.  The previous year's income and   revenue creditor accountsexpenditure  are used as a base on which to build the budget figures for the next year. Historical budgets are realistic in that they are based on last year’s sales.  The main limitation is that historical budgeting does not account for shocks, uncertainty,  dynamic rapid fast swift markets or the actions of competitors. 

ZERO-BASED BUDGET

This is a budget set for a business by using figures based on   impossible potential capable luck  performance; for example, it may be used by a start-up with no historical data.  This method takes away all historical assumptions and starts with a blank canvas, otherwise known as a zero base.  Managers must justify levels of expenditure based on the number of   employees customers readers marketeers they are likely to have in the next year. The main limitation is this relies only on professional judgement and figures cannot be guaranteed.