Capital Budgets - PCR

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
According the Chief Assessors report for June 2006, the question on Capital Budgets was v.poorly answered He indicated that it would be an area worth testing again (although didn't give specifics - boo!)

All I really know about Capital Budgets is that they deal with all capital expenditure and they are used to support financial decision making.

Whereas Operating Budgets deal with the trading aspect of a business, aid planing and monitor performance.

Can anyone expand on this for me as we have not covered this in class, or will simply stating the above be sufficient?? :?

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Budgets - PCR

    I don't think we need to know much more than that. The books I have don't cover much on capital budgets so I guess a simple background on them is all that is needed.

    I'm going to use your answer as my model there and have a few examples ready of why a capital budget is useful and how it relates to other budgets such as revenue budgets. E.g. purchase new machine which produces at a faster output, this will influence cash flow budgets as it's likely we'll need more raw material to ensure machine is operated at 100% capacity etc.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Budgets - PCR

    Hopefully what we have will be enough.

    Neither of us appear to have covered this, therefore surely they cannot expect us to discuss this at any great length.

    Mind you, you never know what they will drop in a the last hurdle! Oh the joy of AAT....not!

    Thanks for you reply! The very best of luck to you!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Budgets - PCR

    A Capital Budget for a business will be one of its largest outgoings.

    CapitaL Expenditure is the purchase of fixed assets for the long term use in the business. This may include purchases of buildings, machinery , fixtures and fittings, cars and other motor vehicles.

    The capital budget will be a long term budget probably covring a number of years ahead showing the deatils of the organisations planned capital expediture.

    I think as long as you can define what it is and answer the question clearly you should be alright. I my self think it highly unlikely that we will be asked this question tomorrow as it appeared in June 2006 exam, but who really knows what the examination is going to be testing us on.

    Good luck Jade :P
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Budgets - PCR

    I sat that paper in june and i never put anything like tha anwser but still passed so i wouldnt worry about stuff like that.

    just make sure you have got your budget method ok and you will be ok
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Budgets - PCR

    Thanks, same to you, :D

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