Tag: budgeting

Questions Related to budgeting

Zero base budgeting was first used by ____________________.

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

  1. U.S. Department of Agriculture

  2. U.K. Department of Agriculture

  3. U.K. Department of Industry

  4. Indian Department of Agriculture

Show answer
Correct Option: A
Explanation:

The Zero-based budgeting concept was advocated in 1924 by British budget authority Edward Hilton Young. He advocated complete justification of every item requested in a budget. The ZBB concept became more popular only in 1970s. In 1960s, ZBB was formally initiated in the Department of Agriculture of the USA.

The first step in the system of introducing zero base budgeting is _____________.

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

  1. Determinations of the extent to which the zero base budgeting is to be introduced

  2. Determination of the objective of budgeting

  3. Preparation of budgets

  4. Development of decision units

Show answer
Correct Option: D
Explanation:

First and foremost step involved in the zero-based budgeting process is, identifying the decision unit. A decision unit can be a single activity or a cluster of activities which can be independently and meaningfully identified.

Zero base budgeting involves __________________.

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

  1. Cost problems

  2. Time problems

  3. Ranking process problems

  4. All of these

Show answer
Correct Option: C
Explanation:

The limitations of ZBB, which arise due to certain operational problems, are as follows:

1. Implementation Problems:

The concerned managers should continue in the same decision units. If they are transferred frequently to other departments, it may lead to waste of time and resources in training and developing new managers.

2. Formulation Problems:

Considerable problems may arise while formulating decision packages. 

3. Ranking Problems:

Problems may arise in ranking of decision packages. General Managers may like to continue their favourable projects for the reasons best known to them. Ranking may also become difficult when there are a large number of decision packages, particularly in a multi-product manufacturing firm.

The most important step involved in the ZBB process.

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

  1. Preparation of budgets

  2. Developments of decision packages

  3. Development of decision units

  4. Review and ranking of decision packages

Show answer
Correct Option: D
Explanation:

There are any number of ways to rank decision packages managers will no doubt employ various methods of ranking. The main point is that the ranking of decision packages is an important process of ZBB. An important element of the ZBB process is that it forces prioritization of all programs and activities.

Operations budgets normally cover a period of ________________.

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

  1. One year or less

  2. One to two years

  3. One to five years

  4. One to ten years

Show answer
Correct Option: A
Explanation:

Operating budgets are typically assembled on a monthly or quarterly basis and cover a one-year period.

The last stage involved in the ZBB process is _____________.

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

  1. Development of decision units

  2. Preparation of budgets

  3. Control & Monitoring of decision packages

  4. Determination of the objective of budgeting

Show answer
Correct Option: C
Explanation:

CONTROLLING AND MONITORING

This is the last step in preparing zero-based budgeting. In this step, decision packages are monitored and evaluated for their performance and output. Measuring the performance of the decision packages helps the management to understand whether the allocation of resources is done accurately or not.

What type of budget is designed to take into account forecast changes in costs, prices etc. _______________.

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

  1. Rolling budget

  2. Flexible budget

  3. Functional budget

  4. Master budget

Show answer
Correct Option: A
Explanation:

A rolling budget is continually updated to add a new budget period as the most recent budget period is completed. Thus, the rolling budget involves the incremental extension of the existing budget model. By doing so, a business always has a budget that extends one year into the future.

Forecasting done is based on the ______________.

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

  1. Past figures

  2. Historical data

  3. Present (Existing) data

  4. Expected events

  5. All of the above

Show answer
Correct Option: E
Explanation:

Forecasting involves identification of past trend and projecting it into the future. It is based on the all the past figures, historical data ,existing data and expected events.

The meaning of 'fund' in funds flow statement is ___________.

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

  1. Cash

  2. Net working capital

  3. Gross working capital

  4. Profit

Show answer
Correct Option: B
Explanation:

Fund flow statement shows that the flow of funds during the year. The meaning of funf in fund flow statement is net working capital.

Which of the following is not a motive for holding cash?

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

  1. Transaction purposes

  2. Precaution against unexpected expenses

  3. Extending loans to group comanies

  4. Speculation purposes

  5. Mismatch between cash inflows and outflows.

Show answer
Correct Option: C
Explanation:

The following points highlight the five main motives for holding cash balances in a firm. The motives are: 1. Transaction Motive 

2. Precautionary Motive 
3. Speculative Motive 
4. Future Requirements 
5. Compensating Balances.