CA Budgeting & Forecasting Flashcards
6 cards from real CA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CA Budgeting & Forecasting flashcards as text
What is a 'master budget' in managerial accounting?
Answer: A comprehensive financial plan integrating all individual subsidiary budgets
A master budget is a comprehensive financial plan that consolidates all subsidiary budgets — operating, capital, and financial — into a single integrated document.
Which budgeting approach requires all expenditures to be justified from scratch each period, starting from a zero base?
Answer: Zero-based budgeting
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.
What is 'variance analysis' in the context of the budgeting process?
Answer: Comparing actual results to budgeted amounts to identify and explain differences
Variance analysis compares actual financial performance against budgeted figures to identify the amount and causes of differences for management action.
A 'favorable variance' in a cost budget occurs when:
Answer: Actual costs are less than the budgeted amount
A favorable cost variance occurs when actual costs come in below the budgeted amount, indicating better-than-planned cost control or efficiency.
In the master budgeting process, which budget is typically prepared first because it drives all other budgets?
Answer: The sales budget
The sales budget is prepared first because revenue projections determine production requirements, which in turn drive all cost, expense, and cash flow budgets.
What is 'participative budgeting' (also called bottom-up budgeting)?
Answer: A process where lower-level managers participate in setting their own budget targets
Participative budgeting involves lower-level managers in the budget-setting process, which can improve forecast accuracy and increase employee commitment to targets.