A master budget is made up of information from

specialized budgets that are generated by individual departments

By regularly reviewing their budgets, businesses are able to determine if they are

following their financial plans.

Which of the following is an advantage of a rolling budget:

It allows you to have a year-long budget in place at all times.

The definition of a budget is

an estimate of income and expense for a specific period.

What is the benefit of having written records of financial transactions?

Information is accurate, accessible, and meaningful

To make sure their budgets are effective, what should businesses do with budget information?

Communicate it to all employees

A budget helps a business evaluate long-term performance by

providing benchmarks of past performance.

The format of a particular budget report

can change to meet a manager’s needs

What is the relationship between a business’s goals and its budget?

Budgets translate a company’s goals into actual means for reaching them

How is a budget like a tree?

A budget is divided into categories & subcategories like to tree branches.

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BM II - Obj 5.02 (FI 106)

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Questions 25

Answers

1
A master budget is made up of information from
the previous year’s budget, with a 10% increase
specialized budgets that are handed down from top management.
specialized budgets that are generated by individual departments
internal sales forecasts and the probable level of competition.
2
By regularly reviewing their budgets, businesses are able to determine if they are
offering loans to employees.
following their financial plans.
paying interest to customers
receiving discounts from vendors.
3
When a business owner or manager uses a budget, s/he
demonstrates leadership.
has to try to make it interesting.
makes more informed decisions.
4
Which of the following is an advantage of a rolling budget:
It allows you to have a year-long budget in place at all times.
It sets an annual budget that does not change
It has to be consulted less frequently by managers
It requires less effort than an annual budget
5
In business, budgets are prepared for a specific time period, usually a
quarter at a time.
calendar year
month at a time
fiscal year
6
Which of the following is a factor that might cause a business to adjust its budget figures
Local elections
Operating policies
Economic trends
Sales procedures
7
The definition of a budget is
an estimate of income and expense for a specific period.
a method for evaluating a manager’s performance.
the key to a business’s success.
a plan for limiting your personal spending.
8
In most cases, a budget’s largest income category is
tax
profit
interest.
sales.
9
The most important reason for budgeting is to
plan for retirement.
accomplish a financial goal.
save for a rainy day.
increase personal wealth.
10
Why is it important for a business’s budget to be well planned?
Pricing is complex.
Money is limited.
Credit is expensive.
Time is valuable
11
What is the benefit of having written records of financial transactions?
Accounting is simplified and less detailed
Information is accurate, accessible, and meaningful
Expenses are reduced, and income is increased.
Investments are increased, and profit is reinvested
12
To develop realistic budgets, existing businesses usually base their estimates on
past performance
government
competition
industry data
13
After a business designates categories of expense in its budget, it
allocates a dollar amount.
attaches a time limit
applies a formula
appoints an accountant
14
The difference between a budgeted amount and an actual amount is called
the balance sheet
a safety net
financial evaluation
a variance.
15
Budgets can be described in terms of
desires, debt, and discipline.
savings, sales, and success.
account books, bills, and bankruptcy.
money, maps, and management.
16
To make sure their budgets are effective, what should businesses do with budget information?
Send it to all stockholders
Communicate it to all employees
Post it on bulletin boards
Provide it to all top managers
17
A budget helps a business evaluate long-term performance by
comparing what/s currently budgeted to what's actually being earned & spent
creating a trail of management decisions
providing benchmarks of past performance.
providing details of all related activities
18
The format of a particular budget report
is unique to each department and manager.
is standardized and does not change
is flexible and unimportant.
can change to meet a manager’s needs
19
What is the relationship between a business’s goals and its budget?
Budgets translate a company’s goals into actual means for reaching them
Goals state the big picture and are unrelated to a detailed budget.
Goals are established after the budget so that they are realistic.
Budgets reflect real business activity while goals are usually unrealistic.
20
Why is it important for a business to budget a certain amount of money to savings?
To avoid financial crisis
To satisfy customers
To prevent governmental control
To pay stockholders
21
How is a budget like a tree?
A budget requires care and nurturing, like a young tree
budget is supported by strong sales like tree is supported by strong roots
A budget is divided into categories & subcategories like to tree branches.
A budget changes from season to season
22
Comparing budgeted and actual amounts can be used to evaluate
the level of competition
the accounting department
employee performance
most aspects of a business
23
Which of the following often prepare budgets in business
All employees
Middle managers
Inventory clerks
Sales cashiers
24
In budgeting, utility bills, salaries, advertising, equipment purchases, taxes, and loans are examples of
spending controls.
business income.
financial goals.
business expenses.
25
A quality of all specialized budgets is that they are
interrelated
driven by projected inventory
unrelated
created independently.

BM II - Obj 5.02 (FI 106) Flashcards | StudBud