Preparing a Budget

Test Yourself

This section offers ten multiple-choice questions to help you identify your baseline knowledge of the essentials of preparing a budget. Answers to the questions are given at the end of the test.

1. Which of the following is not a true statement?
   1. A budget is an action plan for allocating resources and expenditures.
   2. A budget is a historical record of a company’s financial results.
   3. A budget is a yardstick for measuring managers’ performance.
2. The most important element of the budget-preparation process is:
   1. The assessment of variances between expected and actual results.
   2. The communication and planning that occur in preparing a budget.
   3. The end result—the operating, capital, or cash budget that is created.
3. One significant disadvantage ...