chapter 5 : budgeting

Question 1

Which is the most likely purpose of budgeting?
A. Planning and control of an organisation’s income and expenditure
B. Preparation of a five-year business plan
C. Company valuation
D. Assess the non-financial performance of an organisation

Answer 1

A. Planning and control of an organisation’s income and expenditure

Question 2

Which of the following is NOT a functional budget?
A. Direct labour budget
B. Cash budget
C. Direct materials budget
D. Expenses budget

Answer 2

B. Cash budget Production budget

Question 3

Which of the following will NOT appear in a cash budget?
A. Machinery purchased on hire purchase
B. Sales made by cash
C. Depreciation of machinery
D. Wages paid to employee

Answer 3

C. Depreciation of machinery

Question 4

Cash budget is a summary of ___________.
A. projected of sales, cash, and non-cash expenses of a period
B. estimated allowance of receivables of a period
C. forecasted cash receipts and cash payment of a period.
D. recorded cash receipts and cash payment of a period.

Answer 4

C. forecasted cash receipts and cash payment of a period.

Question 5

The budget as a tool of control of the business may not be most successful if
_________
A. it is based on realistic standards of performance
B. managers are given demanding targets
C. budget assumptions are made available to all managers
D. there is full communication and participation

Answer 5

B. managers are given demanding targets

Question 6

The followings are classified as cash payment items EXCEPT
A. payment to business creditors
B. transfer money to a fixed deposit
C. payment of loan
D. disposal of old machine at loss

Answer 6

D. disposal of old machine at loss

Question 7

ii. Which of the following is NOT included in a cash budget?
A. Cash receipts from sales
B. Payment for expenses
C. Bad debt recovery
D. Depreciation

Answer 7

D. Depreciation

Question 8

The following are involved in the budget committee EXCEPT
A. Shareholders
B. Head of department
C. Chief operating officer
D. Group accountant

Answer 8

A. Shareholders

Question 9

The cash budget
A. shows the amount of profit or loss for each month of a budget period.
B. shows the amount of raw materials to be used for a budget period.
C. monitors the expected cash inflows and disbursements for a budget
period.
D. is used to negotiate discounts from suppliers of raw materials.

Answer 9

C. monitors the expected cash inflows and disbursements for a budget
period.

Question 10

Budgets enable the process of evaluation which involves
A. the allocation of resources to planned activities.
B. the communication of plans between department heads.
C. the setting of sales targets that the sales department must achieve.
D. the comparison the actual performance of a firm to its budget targets

Answer 10

D. the comparison the actual performance of a firm to its budget targets