#1
What is a budget?
A financial plan for spending
ExplanationBudget is a plan outlining financial activities.
#2
Which of the following is not a component of a budget?
Debt
ExplanationDebt is not a budget component; it's a liability.
#3
What is the main purpose of creating a budget?
To track and control financial activities
ExplanationBudgets track and control financial activities.
#4
What does a 'balanced budget' mean?
Spending exactly the same amount as earning
ExplanationBalanced budget means spending equals earning.
#5
What is zero-based budgeting?
A budgeting method where expenses must be justified for each new period
ExplanationZero-based budgeting requires justifying all expenses anew.
#6
What is the purpose of a cash flow statement in budgeting?
To track money coming in and going out
ExplanationCash flow statements track inflow and outflow of money.
#7
What is the difference between fixed and variable expenses?
Fixed expenses remain constant, while variable expenses change regularly.
ExplanationFixed expenses are constant; variable ones fluctuate.
#8
What is the purpose of a budget variance analysis?
To compare actual financial results with budgeted amounts
ExplanationBudget variance analysis compares actual and budgeted amounts.
#9
Which budgeting method involves allocating a portion of income to different expense categories?
Cash envelope system
ExplanationCash envelope system allocates income to categories.
#10
What is the key principle behind the envelope budgeting method?
Allocating a specific amount of cash for each spending category
ExplanationEnvelope budgeting assigns cash amounts to spending categories.
#11
What does the term 'rolling budget' refer to?
A budget that is adjusted monthly
ExplanationRolling budget adjusts monthly to reflect changes.
#12
In the context of budgeting, what is a 'sunk cost'?
A cost that has already been incurred and cannot be recovered
ExplanationSunk costs are expenses already incurred, irrecoverable.
#13
What is the primary objective of 'activity-based budgeting'?
To allocate resources based on expected activities
ExplanationActivity-based budgeting assigns resources based on activities.
#14
What is the primary purpose of a capital budget?
To allocate funds for long-term investments
ExplanationCapital budget allocates funds for long-term investments.