Midterm Exam

Question 1

“The budget should be balanced, the treasury should be revealed, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt.”

Answer 1

Cicero

Question 2

A plan expressed in quantitative terms on how to acquire, and use the resources of an entity during a certain future period of time

Answer 2

Budget

Question 3

The process of creating a formal plan and translating goes into a quantitative format

Answer 3

Budgeting

Question 4

Also, called as management or executive committee, is primarily responsible in developing and institutionalizing budgetary systems and processes. It is usually composed of sales manager, production manager, the chief engineer, and the contractor.

Answer 4

Budget committee

Question 5

A detailed set of information and guidelines about the budgeting processes

Answer 5

Budget manual

Question 6

Budget manual includes:

Answer 6

Statements of the budgetary purpose and desired results
A listing of specific budgetary activities to be performed
Calendar of scheduled budgetary activities
Sample budgetary forms
Original, revised and approved budgets

Question 7

The length of time for which a budget is to be prepared and implemented

Answer 7

Budget period

Question 8

It represents the overall plan of the organization for a given budget. It consist of all the individual budgets for each segment of the organization, aggregated or consolidated into one overall budget for the entire firm.

Answer 8

Master budget

Question 9

Master budget is composed of:

Answer 9

Operating budget
Financial budget
Special budget

Question 10

The budgeted income statement for a certain budget period

Answer 10

Operating budget

Question 11

The budgeted balance sheet as of the end of a certain period

Answer 11

Financial budget

Question 12

It includes performance and capital budgets

Answer 12

Special budget

Question 13

The activities to be incurred are to be prioritized based on its order of relevance in line with a defined goal in the coming period without regard to past experience or present condition.

Answer 13

Zero based budgeting

Question 14

This budgetary approach emphasizes the decentralization of budgetary decision making. It pleases local managers and other staff at the center of the budget preparation process, making them responsible for both the preparation and the maintenance of the budget.

Answer 14

Site-based budgeting

Question 15

A time frame is maintained, and when a segment in the budgeted timeframe expire and is dropped, a new segment is to be added to maintain the same timeframe

Answer 15

Continuous (rolling) budgeting

Question 16

It is done over the entire lifespan of a product starting from its period of conception, to infancy, to growth, expansion up to maturity.

Answer 16

Life-cycle budgeting

Question 17

Budgets are developed through joint decision making by top management and operating personnel

Answer 17

Participatory budgeting

Question 18

Budgets are prepared by top management with little or no input from operating personnel

Answer 18

Imposed budgeting

Question 19

Costs and expenses are not segregated to fixed and variable components in the budgeted costs, without the adjustments to actual capacity, serves as the basis in evaluating actual performance

Answer 19

Static (fixed) budgeting

Question 20

Prepared for a different level of activity, costs and expenses are segregated to fixed and variable components giving way to the determination of estimated costs based on actual capacity

Answer 20

Flexible budgeting

Question 21

Expressed in units of materials, number of employees, or number of men hours, or service units, rather than in pesos

Answer 21

Physical budgeting

Question 22

Identifying responsibility centers where revenues and costs are controlled by a responsible officer

Answer 22

Responsibility budgeting

Question 23

It is the practice of linking the allocation of resources to the production outcomes. The objective is to allocate government resources to those service providers or programs that use the most effectively.

Answer 23

Outcome-focused budgeting

Question 24

It is referred to as the historical approach because administrators and chief executives often based their expenditures requests on historical expenditures and revenue data

Answer 24

Line-item budgeting

Question 25

Budgeted expenditures are based on a standard cost of inputs multiplied by the number of units of an activity to be provided in the time.

Answer 25

Performance budgeting

Question 26

Basis expenditures solely on programs of work regardless of objects or organizational units

Answer 26

Full program budget

Question 27

It is considered as a transitional form between traditional line-item and performance approaches

Answer 27

Modified program budgeting

Question 28

Purposes way we have to budget:

Answer 28

Standard setting
Planning
Communication and coordination
Monitoring of activities
Evaluation of results

Question 29

Standards are established as a basis of actions and performance — also as a motivational factor

Answer 29

Standard setting

Question 30

Concrete plans, target, and activities are developed

Answer 30

Planning

Question 31

Goals and processes should be effectively communicated and coordinated to encourage participation, involvement, commitment, and ownership of the organizational plans

Answer 31

Communication and coordination

Question 32

Actions are checked to assess conformity with plans, and to make on-line corrections and adjustments

Answer 32

Monitoring of activities

Question 33

Results are to be evaluated to determine what happened and make end of the line corrections and adjustments

Answer 33

Evaluation of results

Question 34

Limitations

Answer 34

Accuracy of estimates
Adverse reactions from employees
Amount of work involved in developing a good budget
Once the budget is developed, it limits flexibility
It is an expensive tool and implementation is not automatic

Question 35

Nobody can predict what exactly will happen in the future. Hence, future situation’s may warrant revision, or modification of plans

Answer 35

Accuracy of estimates

Question 36

It requires cooperation and participation of all the members. If they lose enthusiasm in carrying out the plans, the entire budgetary system will fail.

Answer 36

Adverse reactions from employees

Question 37

Benefits

Answer 37

Compels management planning
Provides a good framework for judging subsequent performance
Promotes communication, coordination, and control
Motivates members of the organization

Question 38

“A budget tells us what we can’t afford, but it doesn’t keep us from buying it.”

Answer 38

William Feather