CAM Financial Management & Budgeting Flashcards

Which accounting method records revenue when earned and expenses when incurred, regardless of cash movement?

Answer: Accrual accounting

Accrual accounting matches revenues with the period they are earned and expenses with the period they are incurred.

An administrative manager reviewing a vendor invoice notices a charge for services not yet rendered. This is best categorized as a:

Answer: Prepaid expense

A prepaid expense is a payment made in advance for goods or services to be received in a future period.

Which cost allocation method assigns overhead costs to departments based on each department's proportional use of shared resources?

Answer: Activity-based costing

Activity-based costing allocates overhead by identifying cost drivers that reflect actual resource consumption in each activity.

A manager is asked to perform a cost-benefit analysis. What is the primary purpose of this analysis?

Answer: To compare the total expected costs of a project against its anticipated benefits

Cost-benefit analysis evaluates whether the projected benefits of a decision outweigh its total costs to support sound resource allocation.

Internal controls over financial processes are primarily designed to:

Answer: Prevent and detect errors, fraud, and misuse of assets

Internal controls are policies and procedures that safeguard assets, ensure accurate financial reporting, and deter fraudulent activity.

Which type of budget adjusts projected figures periodically throughout the year to reflect actual performance and revised forecasts?

Answer: Flexible budget

A flexible budget is updated as actual activity levels become known, making it more accurate than a static budget for performance evaluation.