MCQ on Cash Budget | Cash Budget MCQs

 MCQ on Cash Budget
Multiple choice questions and answers

In this exclusive page, you will get Cash Budget MCQs for various exams such B.Com, BBA, MCOM, MBA, CMA, CS, ICAI and UGC NET. These Cash Budget MCQs are also very much useful for various competitive exams for commerce stream students.

You can also go through various links given below in the article for Chapter wise Management Accounting MCQs.

Introduction to Cash Budget

A cash budget is a budget or plan of expected cash receipts and disbursements during the period. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payments. In other words, a cash budget is an estimated projection of the company's cash position in the future.

Management usually develops the cash budget after the sales, purchases, and capital expenditures budgets are already made. These budgets need to be made before the cash budget in order to accurately estimate how cash will be affected during the period. 

Chartered Institute of Management Accountant (CIMA) defines cash budgets as a short-term fiscal plan expressed in money which is prepared in advance. It helps to determine the cash-inflow and cash-outflow of the business.

Choose the Correct Alternative

1. Cash budget is a part of:

a) Functional budget

b) Financial Budget

c) Master budget

d) None of the above

Ans: b) Financial Budget

2. While preparing cash budget which of the following items would not be included?

a) Depreciation

b) Credit sales

c) Loss on sale of assets

d) All of the above

Ans: d) All of the above

3. Cash budget is prepared on which basis?

a) Cash basis

b) Accrual basis

c) Hybrid basis

d) None of the above

Ans: a) Cash basis

4. Cash budget is prepared by:

a) Purchase manager

b) Sales manager

c) Finance Manager

d) Chief executive officer

Ans: c) Finance Manager

5. Which one of the following is true about cash budget?

a) It indicates cash excess or cash shortages.

b) Cash budget is closely related to other functional budgets.

c) It establishes a sound basis for obtaining credit.

d) All of the above

Ans: d) All of the above

6. Cash budget is prepared from:

a) Functional budgets

b) Financial budgets

c) Capital expenditure budget

d) All of the above

Ans: d) All of the above

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7. Cash budget is _____ in nature

a) Short term

b) Long term

c) Mid-term

d) None of the above

Ans: a) Short term

8. Cash budget is based on:

a) Sales forecasts

b) Expenses budgets

c) Capital expenditure budget

d) All of the above

Ans: d) All of the above

9. Cash budget is prepared because it:

a) Indicates probable cash position as a result of planned operations.

b) It indicates in advance cash excess or shortages.

c) It indicates the need of short term borrowings.

d) All of the above

Ans: d) All of the above

10. Cash budget is expressed in:

a) Monetary terms

b) Physical terms

c) Both monetary and physical terms

d) All of the above

MCQ on Budget and Budgetary Control

Ans: a) Monetary terms

11. Which one of the following is not true about cash budget?

a) Cash budget indicates the balance of cash at the end of every budget period.

b) Cash budget does not include depreciation and credit sales.

c) It ensures balance between liquidity and profitability.

d) Sales budget is prepared on the basis of cash budget.

Ans: d) Sales budget is prepared on the basis of cash budget.

12. Cash budget is a summary of:

a) Estimated cash receipts and cash payments

b) Estimated expenses and incomes

c) Estimated purchases and sales

d) All of the above

Ans: a) Estimated cash receipts and cash payments

13. Cash budget is a useful tool for:

a) Planning and control of working capital

b) Liquidity management

c) Controlling cash expenditure

d) All of the above

Ans: d) All of the above

14. Which of the following are methods of preparing cash budget?

a) Receipts and Payments Method

b) Adjusted Profit and Loss method

c) Funds flow method

d) All of the above

Ans: d) All of the above

15. Adjusted profit and loss method of cash budget is also known as:

a) Funds flow statement

b) Cash flow statement

c) Ratio analysis

d) Comparative statements

Ans: b) Cash flow statement

16. Which of the following items appear on cash budget?

a) Collection from debtors

b) Dividend paid

c) Income tax paid

d) All of the above

Ans: d) All of the above

17. The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget?

a) Sales budget

b) Overheads budget

c) Raw material budget

d) Production budget

Ans: d) Production budget

18. Which of the following is not found in the financing section of the cash budget?

a) Cash collection

b) Cash payments

c) Collection from issue of shares

d) Cash deficiency

Ans: d) Cash deficiency

19. Cash budget is based on which budget?

a) Sales budget

b) Overheads budget

c) Raw material budget

d) All of the above

Ans: d) All of the above

20. Cash budget does not include:

a) Non-cash transactions

b) Credit sales to debtors

c) Outstanding expenses

d) All of the above

Ans: d) All of the above

Also read:

2. Financial Statements & Financial Statement Analysis MCQs

3. Ratio Analysis MCQs

4. Funds Flow Statement MCQs

5. Marginal Costing MCQs

6. Budget and Budgetary Control MCQs

7. Standard Costing MCQs

8. Management Accounting MCQs

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