2.2.4 Budgets

• Adverse variance - when costs are greater than budgeted.
• Favourable variance - when costs are less than budgeted.
• Budget - a financial plan of income and expenditure for a period of time.
• Historical budgeting - a budget based upon previous financial figures.
• Variance analysis - shows the difference between budgeted and actual figures and can be calculated once figures are known, at the end of the financial year.
• Zero based budget - a budget where no money is allocated for spending.