Tag: budgeting

Questions Related to budgeting

Sales expenditure budget is prepared by estimating the expense(s) of _________________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Advertisement

  2. Market analysis

  3. Salesman's salary

  4. All of the above

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Correct Option: D
Explanation:

Sales expenditure budget is prepared by estimating the expense(s) of Advertisement, Market analysis and Salesman's salary.

_________ determines the priorities of functional budget.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Principal Budget Factor

  2. Limiting Factor

  3. Both (A) and (B)

  4. None of the above

Show answer
Correct Option: C
Explanation:

The principal budget factor is the factor that limits the activities of functional budgets of the organisation. The early identification of this factor is important in the budgetary planning process because it indicates which budget should be prepared first. In general sales volume is the principal budget factor.

The principle that the factor (such as a particular nutrient, water, or sunlight) that is in shortest supply (the limiting factor) will limit the growth and development of an organism or a community.

In capital budgeting, a negative net present value results in _______________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Zero economic value added

  2. Percent economic value added

  3. Negative economic value added

  4. Positive economic value added

Show answer
Correct Option: C
Explanation:

Economic value added is the incremental difference in the rate of return over a company's cost of capital. In essence, it is the value generated from funds invested in a business. If the economic value added measurement turns out to be negative, this means that management is destroying the value of the funds invested in a business

The difference between fixed and variable cost has a special significance in the preparation of _______________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Cash budget

  2. Functional budget

  3. Master budget

  4. Flexible budget

Show answer
Correct Option: D
Explanation:

Flexible budget is a budget that changes as per the activity level or production of units. Fixed budget is static and doesn't change at all. Flexible budget, on the other hand, is adjustable as per the necessity of the business. Fixed budget is always fixed.

The fixed-variable cost classification has a special significance in the preparation of Flexible budgets.

The budget that is prepared first is _______________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Budget for the key factor

  2. Cash budget

  3. Master budget

  4. Flexible budget

Show answer
Correct Option: A
Explanation:

Firstly, determine the principal budget factor. This is also known as the key budget factor or limiting budget factor and is the factor which will limit the activities of an undertaking. This limits output, e.g. sales, material or labour.

A system by which budgets are used as a means of planning and controlling all aspects of a business is called _____________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Programme

  2. Budget Manual

  3. Budgetary control

  4. Budget period

Show answer
Correct Option: C
Explanation:

Budgetary control is a system of procedures used to ensure that an organization's actual revenues and expenditures adhere closely to its financial plan.

Budget is a projection of ________________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Cost accounts

  2. Financial accounts

  3. Management accounts

  4. Corporate accounts

Show answer
Correct Option: B
Explanation:

Financial Projections – “A forecast of future revenues and expenses for a business, organization, or country. 

Budget – “An estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.”

Sales budget is a _______________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Master budget

  2. Expenditure budget

  3. Functional budget

  4. Cash budget

Show answer
Correct Option: C
Explanation:

A functional budget for the manufacture of a product line might include estimated costs of production, marketing, sales, labor, equipment and materials, as well as projected sales income.

___________ is a summary of all functional budgets in a capsule form.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Master budget

  2. Cash budget

  3. Flexible budget

  4. Zero-base budget

Show answer
Correct Option: A
Explanation:

The Master Budget is consolidated summary of the various functional budgets. It has been defined as “a summary of the budget schedules in capsule form made for the purpose of presenting, in one report, the highlights of the budget forecast”.

A detailed plan of operation for some specific future period is called _____________.

commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

  1. Budget

  2. Execution

  3. Decision making

  4. Planning

Show answer
Correct Option: A
Explanation:

A budget is a financial plan for a defined period, often one year. It may also include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows.