Question

Why is it important to compare actual income and expenditure figures against budget figures at regular intervals? Discuss in 50 to 80 words. (Please answer in Australian Accounting Environment and please type up your answer)

Answer 1

To use your budgets effectively, you will need to review that on time to time with actual data (Income and expenditure) and change or revise it if required. Budgets help you manage your cashflow effectively and it also help to identify what needs to be achieved in the next budgeting period. There are two main areas to consider when reviewing your budget i.e. - income and expenditure:-

Income:-

1) Analyse the reasons for any shortfall.

2) Find out the reasons for a high turnover.

3) Compare the timing of your income with your projections.

Expenditure:-

1) Analyse the differences if any in the timing of your expenditure.

2) Find out how your fixed cost differed from your budget.

3) Analyse whether actual variable cost is as per budget or not.

I hope above will help you but still if you have any doubt please let me know/..