Sample Quizzes For Preparation: Budgeting And Budgetary Control

A2 Level Accounting – Quiz on 4.3.1 Budgeting and Budgetary Control

1. What is the main purpose of preparing a budget in an organisation?

A. To compare different departments’ performance
B. To calculate taxation
C. To estimate future income and expenditure
D. To determine the break-even point

2. Which of the following is NOT a benefit of budgetary control?

A. Improved coordination
B. Unpredictable expenses
C. Cost control
D. Performance evaluation

3. What does a cash budget primarily forecast?

A. Profit margins
B. Sales revenue
C. Cash inflows and outflows
D. Production output

4. Which budget would you use to predict credit sales collections?

A. Trade payables budget
B. Trade receivables budget
C. Production budget
D. Labour budget

5. Which of the following is a disadvantage of fixed budgeting?

A. It adjusts for volume changes
B. It is only used in manufacturing
C. It is flexible
D. It cannot adjust to actual activity levels

6. Which type of budgeting adjusts figures based on actual output levels?

A. Master budget
B. Flexible budget
C. Cash budget
D. Static budget

7. Which of the following best describes a master budget?

A. The most detailed departmental budget
B. Only a sales and production plan
C. The consolidated summary of all budgets
D. A cash flow statement

8. A sales budget usually includes:

A. Total fixed cost
B. Product profitability
C. Units expected to sell and price per unit
D. Market share

9. A major behavioural issue with budgeting is:

A. Staff using financial jargon
B. Lack of stakeholder approval
C. Unrealistic targets demotivating staff
D. Excess inventory

10. What is the key focus of variance analysis in budgetary control?

A. Identifying different stakeholders
B. Forecasting future profits
C. Comparing actual and budgeted figures
D. Determining number of customers

11. Which is NOT a functional budget?

A. Production budget
B. Cash budget
C. Purchases budget
D. Master budget

12. The starting point for most budget preparations is:

A. Purchases budget
B. Cash flow budget
C. Sales budget
D. Labour budget

13. Limiting factors in budgeting usually refer to:

A. Factors that control inflation
B. Financial statements
C. Constraints like labour or machine hours
D. Long-term assets

14. Which document shows estimated revenue and expenses for the period?

A. Statement of financial position
B. Cash budget
C. Income budget
D. Budgeted income statement

15. A flexible budget is more useful than a fixed budget when:

A. Activity levels remain constant
B. Costs are entirely fixed
C. Activity levels vary
D. Inflation is stable

16. A key non-financial consideration in budgeting is:

A. Depreciation
B. Staff morale
C. Inventory level
D. Tax rates

17. Which budget estimates the cost and number of employees required?

A. Labour budget
B. Sales budget
C. Purchases budget
D. Master budget

18. The budget used to calculate expected payments to suppliers is:

A. Trade receivables budget
B. Production budget
C. Trade payables budget
D. Cash budget

19. Budgetary control involves:

A. Updating shareholder information
B. Monitoring past trends only
C. Comparing budgeted figures with actual performance
D. Paying taxes

20. Which of the following is a qualitative impact of budget targets?

A. Working capital increase
B. Increased dividend
C. Employee motivation
D. Higher profit margin

21. Which of these budgets would be affected first by a change in sales forecast?

A. Production budget
B. Labour budget
C. Cash budget
D. Trade payables budget

22. The budget that records expected spending on raw materials is:

A. Sales budget
B. Production budget
C. Purchases budget
D. Labour budget

23. What is the purpose of preparing a budgeted statement of financial position?

A. To calculate actual liabilities
B. To predict the company’s financial standing
C. To monitor taxes
D. To show retained earnings

24. The comparison of flexible budget and actual results helps to:

A. Calculate shareholder dividends
B. Evaluate managerial performance
C. Determine loan interest
D. Improve depreciation methods

25. What type of budgeting is most useful for short-term planning?

A. Capital budgeting
B. Long-range budgeting
C. Operational budgeting
D. Zero-based budgeting

26. The document that reconciles budgeted and actual costs is called a:

A. Cash flow forecast
B. Income summary
C. Variance statement
D. Budgeted capital account

27. One advantage of using spreadsheets for budgeting is:

A. Automatic bank reconciliation
B. Speed of recalculations
C. Reduced data entry errors
D. Direct audit trail creation

28. Which term refers to revenue being less than budgeted?

A. Favourable variance
B. Neutral variance
C. Break-even variance
D. Adverse variance

29. Which variance would be investigated in budgetary control?

A. Cost of sales variance
B. Price or usage variance
C. VAT variance
D. Capital allowance variance

30. The risk of setting overly difficult budget targets may cause:

A. Higher productivity
B. Employee sabotage or withdrawal
C. Lower taxation
D. Capital expenditure

Answer Key and Explanations