Topic 7 Budgeting

How is a budget most likely to be effective?

• If it is not used to evaluate a manager's performance

• If it is used to assess blame when things do not occur according to plans

• If employees and managers at the lower levels do not get involved in the budgeting process

• If the overall objective is to reach an agreement that all managers consider to be fair and achievable

How is Net Cash Flow calculated?

• Opening balance of cash plus cash inflows

• Profits less expenses

• Cash inflows less cash outflows

• Cash inflows plus cash outflows

The payment of salary, wages, overheads, cash purchase and payment to suppliers are form of 

• Cash payment for capital transaction

• Cash payment to owners of the business

• Cash payment for business operations

• Cash payment of non-operating expenses

It is important that budgets be accepted by:

• Division managers, department heads and supervisors

• Supervisors

• Division managers

• Department heads

What does the cash budget reflect?

• All revenues and all expenses for a period

• All the items that appear on a budgeted income statement.

• All the items that appear on a budgeted statement of financial position

• Expected cash receipts and cash disbursements from all sources

Advantages of maintaining cash budgets would not include one of the following: 

• Surplus cash can be put to more profitable uses if expected to occur

• Overdrafts can be negotiated in advance when they are needed

• Time is available to investigate the possible future sources of finance

• Receivables can be paid more quickly

The receipts from cash sales, advance from customers, collection from accounts receivables is 

• Receipts from non-business operations

• Receipts from capital transactions

• Receipts from business operations

• Receipts from shareholders

Which one of the following is a benefit of budgeting?

• It requires only one level of management to plan when the business first commenced its operations

• It facilitates the coordination of activities

• It provides assurance that the company will achieve its objectives

• It provides indefinite objectives for evaluating performance