Budget - a plan for the future that takes into account the resources that are available to the business
Reasons to budget:
- Measuring all inflows and outflows of money can show how efficient the business is
- Provides information to shareholders and investors
- Ensures cash flow is adequate to meet the day-to-day needs of the business
- Provides managers with the information they need to manage their departments and monitor their performance
Variance - The amount by which the actual financial results differ from the amount in the budget.