Management Accounting 6th Canadian Edition By Horngren – Test Bank

Chapter 11 The Master Budget

1) A budget is a formal, quantitative expression of plans that provides a benchmark against which to measure actual performance.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 448
Objective: 1

2) A capital budget is a periodic business plan that includes a coordinated set of detailed operating schedules and financial statements.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 456
Objective: 4

3) An operating budget is the major part of a master budget, and focuses on the income statement and its supporting schedules.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 456
Objective: 4

4) Budgeting forces managers to think ahead and to anticipate and prepare for changing conditions.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 448
Objective: 1

5) The first step in preparing the master budget is the preparation of the budgeted income statement.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 448
Objective: 1

6) The cash budget is the first budget prepared in the master budget.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 456
Objective: 4

7) Budgeted purchases are equal to the cost of goods sold plus any beginning inventory.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 448
Objective: 1

8) A cash budget is a statement of planned cash receipts and cash disbursements.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 456
Objective: 4

9) Cash budgets help management to avoid having unnecessary idle cash on the one hand, and unnecessary cash deficiencies on the other.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 456
Objective: 4

10) The accuracy of estimated purchases budgets, production schedules, and costs depends on the detail and accuracy of the budgeted operating expenses.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 448
Objective: 1