CAP Financial Management and Budgeting 1 — Questions and Answers
Question 1: Which budgeting approach requires all expenses to be justified from zero each budget period, rather than using the prior period as a baseline?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Rolling budget
- Capital budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting starts from a zero baseline each period, requiring justification for every expenditure.
Question 2: An administrative professional submits an expense report that includes a non-reimbursable personal charge. According to standard expense policy, what should happen?
- The entire report is rejected
- The personal charge is removed and the remainder is processed (Correct answer)
- The charge is split between employer and employee
- The manager approves it as a one-time exception
Correct answer: The personal charge is removed and the remainder is processed
Standard expense policy removes non-reimbursable items and processes the remaining valid expenses.
Question 3: Which financial document summarizes revenues, expenses, and net income over a specific period?
- Balance sheet
- Income statement (P&L) (Correct answer)
- Cash flow statement
- Statement of retained earnings
Correct answer: Income statement (P&L)
An income statement (profit and loss statement) reports revenues and expenses over a period to show net income or loss.
Question 4: What is petty cash used for in an office environment?
- Paying monthly vendor invoices
- Covering small, incidental day-to-day office expenses (Correct answer)
- Reimbursing executive travel costs
- Purchasing major office equipment
Correct answer: Covering small, incidental day-to-day office expenses
Petty cash is a small reserve fund used to pay minor, routine expenses without issuing a formal check or payment.
Question 5: A purchase order (PO) primarily serves to:
- Authorize a vendor to deliver goods/services at agreed terms (Correct answer)
- Record payment of an invoice
- Document a shipment receipt
- Request a refund from a supplier
Correct answer: Authorize a vendor to deliver goods/services at agreed terms
A purchase order is a formal document authorizing a vendor to supply specified goods or services at agreed pricing and terms.
Question 6: Which term describes the difference between actual spending and the planned budget amount?
- Depreciation
- Variance (Correct answer)
- Accrual
- Amortization
Correct answer: Variance
Budget variance is the difference between the actual amount spent and the budgeted amount for a given line item.
CAP Financial Management and Budgeting 1
Which budgeting approach requires all expenses to be justified from zero each budget period, rather than using the prior period as a baseline?