Module 6

Question 1

MISCONCEPTIONS ON BUDGETING
Literature on budgeting is so numerous that causes confusions on the instead of
enlightenment. This are due to:

Answer 1

Lack of system
Lack of comprehensiveness
Lack of consistency
Lack of integration in the budget documents

Question 2

was used by the King’s treasurer, the exchequer, to carry documents
explaining the king’s fiscal needs. Later the budget containing the documents explaining the needs and resources of the country.

Answer 2

Bouget

Question 3

The term budget traced back to the Middle English word derived from Middle French word Bouget , diminutive of bouge means leather bag, which in turn was derived from the Latin word Bulga meaning bag or purse.

Answer 3

Bowgette

Question 4

views it as a process consisting of a series of activities relating
expenditures to a set of goals.

Answer 4

Allan Schick

Question 5

“The budget is the master plan of government. It brings together estimates of
anticipated revenues and proposed expenditures, implying the schedule of activities to
be undertaken and the means of financing those activities. In the budget, fiscal policies
are coordinated, and only in a budget can a more unified view of the financial direction
which the government is going to be observed.”

Answer 5

Professor Philip E. Taylor

Question 6

a financial plan which serves as the pattern for and a control over future operations and
a systematic plan for utilization of manpower material or other resources.

Answer 6

Eric Kohler

Question 7

Objectives of Fiscal Policy

Answer 7

1. Full employment
2. Price Stability
3. Accelerating the rate of economic development
4. Optimum allocation of resources
5. Equitable distribution of income and wealth
6. Economic stability
7. Capital Formation

Question 8

is spending made by the government of a country on collective needs and wants such
as pension, provision, infrastructure, etc.

Answer 8

Public Expenditure

Question 9

Classifications of Philippine Public Expenditures

Answer 9

1. Capital and Revenue Expenditure
2. Development And Non - Developmental Expenditure / Productive And Non -
   Productive Expenditure
3. Transfer And Non - Transfer Expenditure
4. Plan And Non - Plan Expenditure

Question 10

Mrs. Hicks classified Public Expenditure on the
basis of duties of government. It is as follows

Answer 10

1. Defense Expenditure
2. Civil Expenditure
3. Development Expenditure

Question 11

Types of Funds

Answer 11

Mutual Funds
Exchange-Traded Funds (ETFs)
Hedge Funds
Index Funds
Money Market Funds
Bond Funds
Equity Funds
Real Estate Investments Trusts (REITs)
Commodity Funds
Sector Funds
Target-date funds
Balanced Funds

Question 12

also known as hybrid funds, invest in a mix of stocks and bonds to provide a balanced approach to risk and return.

Answer 12

balanced funds

Question 13

(or lifecycle funds) are designed to adjust their asset allocation based on the investor’s target retirement date. They automatically become more conservative
as the target date approaches.

Answer 13

Target-date funds

Question 14

concentrate on a specific industry or sector of the economy, such as
technology, healthcare, or energy. They aim to capitalize on the growth potential of that
particular sector.

Answer 14

Sector Funds

Question 15

invest in physical commodities or commodity futures contracts. They
provide exposure to the performance of commodities such as gold, oil, or agricultural
products.

Answer 15

Commodity Funds

Question 16

are funds that invest in income-generating real estate properties. They offer
investors a way to participate in real estate without directly owning physical properties.

Answer 16

Real Estate Investment Trusts (REITs)

Question 17

or stock funds, invest primarily in stocks. They can be broadly diversified or focus on specific sectors or regions. The goal is capital appreciation through stock price appreciation.

Answer 17

Equity Funds

Question 18

invest in short-term, low-risk securities like Treasury bills and
commercial paper. They are known for their stability and liquidity, making them a
popular choice for preserving capital.

Answer 18

Money Market Funds

Question 19

invest in a portfolio of bonds. They can focus on government bonds, corporate bonds, municipal bonds, or a combination of these. Bond funds may vary in
terms of risk and duration.

Answer 19

Bond Funds

Question 20

aim to replicate the performance of a specific market index, such as the
S&P 500. They offer broad market exposure and generally have lower fees compared to
actively managed funds.

Answer 20

Index Funds

Question 21

are investment funds that use various strategies to generate returns for
their investors. They may employ leverage, derivatives, and other advanced techniques.
They are typically open to accredited or institutional investors.

Answer 21

Hedge Funds

Question 22

are similar to mutual funds but are traded on stock exchanges like individual
stocks. They often track a specific index, commodity, or a basket of assets.

Answer 22

ETFs

Question 23

pool money from multiple investors to invest in a diversified portfolio of
stocks, bonds, or other securities. They are managed by professional fund managers.

Answer 23

Mutual Funds

Question 24

refers to the money required to cover the payment of interest and principal
on a loan or other debt for a particular time period. The term can apply both to individual
debts, such as a home mortgage or student loan, and corporate or government debt,
such as business loans and debt-based securities such as bonds.

Answer 24

Debt service

Question 25

Budget is a document containing words and figures which proposes expenditures for certain items and purposes. Expenditures Salaries, Equipment, Travels Purposes Preventing wars, Improving mental health Figures are attached to each item or purpose.

Answer 25

Aaron Wildavsky

Question 26

Budget is termed as

Answer 26

-Nothing but a mere scrap of paper -Voluminous Farce -Huge piece of garbage

Question 27

refers to that expenditure which results in creation of fixed assets. They are in the form of investment. They add to the net productive assets of the economy. Capital Expenditure is also known as development expenditure as it increases the productive capacity of the economy. It is an investment expenditure and a non-recurring type of expenditure. For Eg. Expenditure - on agricultural and industrial development, irrigation dams, public - enterprises etc, are all capital expenditures

Answer 27

Capital Expenditure

Question 28

Expenditure on infrastructure development, public enterprises or development of agriculture increase productive capacity in the economy and bring income to the government. Thus they are classified as productive expenditure. All expenditures that promote economic growth development are termed as development expenditure.

Answer 28

Development or Non-Developmental Expenditure/Productive or Non Productive Expenditure

Question 29

is also known as development expenditure as it increases the productive capacity of the economy.

Answer 29

capital expenditure

Question 30

relates to that expenditure which results in creation of income or output

Answer 30

Non-Transfer expenditure

Question 31

refers to those kind of expenditures against there is no corresponding transfer of real resources i.e., goods or services. Such expenditure includes public expenditure on :- National Old pension Scheme, Interest payments, subsidies, unemployment allowances, welfare benefits to weaker sections etc. By incurring such expenditure, the government does not get anything in return, but it adds to the welfare of the people, especially to weaker sections of society.

Answer 31

Transfer Expenditure

Question 32

incurred on development activities outlined in ongoing five year plan. In 2009-10, the plan expenditure of Central Government was 5.3% of GDP.

Answer 32

plan expenditure

Question 33

is incurred on those activities, which are not included in five-year plan

Answer 33

non-plan expenditure

Question 34

non-development expenditures include

Answer 34

-defense -subsidies -interest payments -maintenance

Question 35

This ratio compares the company’s net operating income with the amount of principal and interest that it is obligated to pay on its current debts.

Answer 35

Debt Service Coverage Ratio

Question 36

Objectives of Budgeting

Answer 36

1. Strengthening administrative process 2. Achieving more effective and more stringent fiscal controls 3. Securing efficiency and economy 4. Effecting better utilization of resources 5. Controlling Inflation 6. Broaden understanding and awareness of budget control

Question 37

is an opportunity for government to assess the volume of taxation & expenditures to offset threats of inflation or economic recession.

Answer 37

Budget preparation and formulation