CA CA Budgeting & Forecasting

Question 1

What is a 'master budget' in managerial accounting?

Accepted Answer

A comprehensive financial plan integrating all individual subsidiary budgets

Answer

A master budget is a comprehensive financial plan that consolidates all subsidiary budgets — operating, capital, and financial — into a single integrated document.

Question 2

Which budgeting approach requires all expenditures to be justified from scratch each period, starting from a zero base?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting requires managers to justify every expense from the ground up each period rather than using prior-year figures as an automatic baseline.

Question 3

What is 'variance analysis' in the context of the budgeting process?

Accepted Answer

Comparing actual results to budgeted amounts to identify and explain differences

Answer

Variance analysis compares actual financial performance against budgeted figures to identify the amount and causes of differences for management action.

Question 4

A 'favorable variance' in a cost budget occurs when:

Accepted Answer

Actual costs are less than the budgeted amount

Answer

A favorable cost variance occurs when actual costs come in below the budgeted amount, indicating better-than-planned cost control or efficiency.

Question 5

In the master budgeting process, which budget is typically prepared first because it drives all other budgets?

Accepted Answer

The sales budget

Answer

The sales budget is prepared first because revenue projections determine production requirements, which in turn drive all cost, expense, and cash flow budgets.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA CA Budgeting & Forecasting