COA COA Financial Management & Budgeting 2 — Questions and Answers
Question 1: Variance analysis in budgeting compares:
- Two competitors' financial reports
- Actual results against budgeted figures (Correct answer)
- Current year totals against prior year totals
- Revenue against industry benchmarks
Correct answer: Actual results against budgeted figures
Variance analysis measures the difference between actual financial performance and the budgeted or planned figures to identify areas needing attention.
Question 2: Which financial control practice involves comparing the company's bank statement to its own internal cash records?
- Accounts reconciliation
- Bank reconciliation (Correct answer)
- Cash audit
- Ledger review
Correct answer: Bank reconciliation
Bank reconciliation is the process of matching the company's internal cash ledger with the bank statement to identify discrepancies.
Question 3: An office administrator processing expense reports should verify that all claims include:
- Supervisor's personal approval only
- Receipts and a business purpose for each expense (Correct answer)
- A handwritten note from the employee
- Pre-approval from the CFO
Correct answer: Receipts and a business purpose for each expense
Proper expense report processing requires original receipts and a documented business purpose to ensure the expense is legitimate and reimbursable.
Question 4: Accounts receivable represents money:
- The company owes to suppliers
- Owed to the company by its customers (Correct answer)
- Held in reserve for taxes
- Budgeted for future capital projects
Correct answer: Owed to the company by its customers
Accounts receivable is an asset on the balance sheet representing amounts customers owe the company for goods or services already delivered.
Question 5: Which term describes the process of spreading the cost of a long-term asset over its useful life?
- Amortization of intangibles only
- Depreciation (Correct answer)
- Accrual
- Capitalization
Correct answer: Depreciation
Depreciation allocates the cost of a tangible fixed asset (such as office equipment) over its estimated useful life as an expense.
Question 6: When preparing an office budget, a 'contingency fund' is included to:
- Cover employee raises automatically
- Handle unexpected or unplanned expenses (Correct answer)
- Pay for planned capital expenditures
- Reimburse client entertainment costs
Correct answer: Handle unexpected or unplanned expenses
A contingency fund is a budget reserve set aside to manage unforeseen costs or emergencies without disrupting the overall financial plan.
COA COA Financial Management & Budgeting 2
Variance analysis in budgeting compares: