AFE Quiz 26: Budgeting and Forecasting – Accounting for Everyone

What is the primary purpose of budgeting in an organization?

To record actual transactions
To plan and control financial resources
To pay taxes
To prepare financial statements

Which type of budget is prepared for a single level of activity?

Flexible budget
Static budget
Rolling budget
Zero-based budget

What is a rolling budget?

A budget that is updated continuously by adding a new period as the current period ends
A budget for a single period
A budget that starts from zero each year
A budget that includes only cash items

Which budget estimates the expected cash inflows and outflows for a period?

Sales budget
Production budget
Cash budget
Capital expenditure budget

What is the first step in the budgeting process?

Prepare the cash budget
Set objectives and gather information
Prepare the production budget
Compare actual results with the budget

Which forecasting method uses historical data to predict future trends?

Qualitative forecasting
Quantitative forecasting
Zero-based forecasting
Scenario analysis

Zero-based budgeting requires managers to:

Justify all expenses from scratch
Use last year’s budget as a base
Only focus on variable costs
Ignore fixed costs

Which budget is usually prepared first in the master budgeting process?

Production budget
Sales budget
Cash budget
Direct materials budget

What is variance analysis?

Comparing budgeted results with actual results
Preparing a budget for each department
Forecasting future sales
Setting budget objectives

Which of the following is a benefit of budgeting?

Improved coordination
Better control of resources
Motivation of employees
All of the above