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1.     The financial budgets of a nonmanufacturing company include the capital budget,      the cash budget, and the budgeted balance sheet.

2.      Budgets are a manager’s tool to plan, understand, and control operations.

3.     A capital budget is a periodic business plan that includes a coordinated set of detailed operating schedules and financial statements.

4.     An operating budget is the major part of a master budget that focuses on the income statement and its supporting schedules.

5.     The major drawback of using historical results for judging current performance is that inefficiencies may be concealed in the past performance.


6.     A budget is a qualitative expression of a plan of action.
     
7.     A budget is an example of an informal business plan.
     
8.     “Cooking the books” refers to reporting false accounting numbers.
     
9.     Budgeting may use nonfinancial terms.
     
10.     A good budget process communicates from the top down, but not from the bottom up.
     
11.     The most forward-looking budget is the strategic plan.
     
12.     Decisions made during long-range planning include the design of a new plant and whether to delete a product from a company’s product line.
     
13.     The master budgeting process summarizes the key decisions regarding all aspects of the company’s value chain.

 


14.     Cash collections from customers include the current month’s cash sales plus collections on credit sales.

15.     The first step in preparing the master budget is generally the preparation of the budgeted income statement.


16.     Accurate sales forecasting is essential to effective budgeting.
     
17.     Budgeted purchases = beginning inventory + cost of goods sold – desired ending inventory.
     
18.     Examples of expenses driven by sales volume include rent and insurance.
     

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