Question 26. A forecast set of final accounts is also known as: (A) Capital budget (B) Cash budget (C) Master budget (D) Sales budget Answer: (B) Cash budget
Question 27. (A) Loan taken by firm (B) Proceeds from asset disposal (C) Reduction in provision for doubtful debts (D) Cash sales Answer: (C) Reduction in provision for doubtful debts
Question 28. Which of the following budgets should be produced first? (A) Production budget (B) Purchases budget (C) Master budget (D) Sales budget Answer: (D) Sales budget
Which of the following will not affect preparation of cash budget?
Question 29. Budgetary control involves all but one of the following: (A) Modifying future plans (B) Analyzing differences (C) Using static budgets (D) Determining differences between actual and planned results Answer: (C) Using static budgets
Question 30. A static budget is useful in controlling costs when cost behaviour is: (A) Mixed (B) Fixed (C) Variable (D) Linear Answer: (B) Fixed
Question 31. Responsibility centers include: (A) Cost centers (B) Profit centers (C) Investment centers (D) All of the above Answer: (D) All of the above
Question 32. Which of the following objective is not primary purpose of preparing budget? (A) To provide a basis for comparison of actual performance (B) To communicate the company’s plan throughout the organization and insure co-ordination of activity throughout the organization (C) To control income and expenditure for a given period (D) To insure that company expands its operations Answer: (D) To insure that company expands its operations
Question 33. Which of the following statements most clearly describes the master budget? (A) The master budget is similar to a legal action and must be followed to fulfill company policy. (B) The master budget is a strategic plan proposed by management and communicated through pro forma financial statements. (C) The master budget is a set of budgeted financial statements that are sometimes called pro forma statements. (D) The master budget is not in itself a strategic plan but aids managers in implementing their strategic plans. Answer: (D) The master budget is not in itself a strategic plan but aids managers in implementing their strategic plans.
Operating budgets are: (A) A forecast of expected operating expenses (B) A forecast of operating expenses (C) Concerned with the income generating activities of a firm (D) Concerned with the inflows and outflows of cash Answer: (C) Concerned with the income generating activities of a firm
Question 34. Managers can use feedback from budgets to help them evaluate performance if they initially (A) Pinpoint fault for operating problems (B) Focus on whom they should ask and not on whom they should blame (C) Fix the blame on those who are responsible for actions that do not meet budget expectations (D) Designate the appropriate responsibility centre to be held accountable for any problems Answer: (B) Focus on whom they should ask and not on whom they should blame
Question 35. A manager who is responsible for receivables and stock would most likely be considered in charge of ………………. (A) Profit centre (B) Revenue centre (C) Cost centre (D) Investment centre Answer: (D) Investment centre
Question 36. Which of the following represents the normal sequence in which the below budgets are prepared. (A) Sales, Balance Sheet, Income Statement (B) Balance Sheet, Sales, Income Statement (C) Sales, Income Statement, Balance Sheet (D) Income Statement, Sales, Balance Sheet Answer: (C) Sales, Income Statement, Balance Sheet
Question 38. Which of the following is NOT an advantage of budgeting? (A) It provides resource information that can be used to improve decision making. (B) It aids in the use of resources and employees by setting a benchmark that can be used for the subsequent evaluation of performance. (C) It provides organizational independence. (D) It improves communication and coordination Answer: (C) It provides organizational independence.