COA COA Financial Management & Budgeting 4 — Questions and Answers
Question 1: Which budgeting approach starts from zero each period, requiring every expense to be justified regardless of prior budgets?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Rolling budget
- Flexible budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting requires justification for all expenditures from scratch each period, unlike incremental budgeting which adjusts prior figures.
Question 2: An office manager receives an invoice dated July 15 with net-30 terms. What is the payment due date?
- July 30
- August 14
- August 15 (Correct answer)
- September 15
Correct answer: August 15
Net-30 terms mean payment is due 30 days from the invoice date, so July 15 + 30 days = August 14, but since August 14 is the 30th day, the due date is August 14.
Question 3: Which financial statement shows a company's revenues and expenses over a specific time period?
- Balance sheet
- Cash flow statement
- Income statement (Correct answer)
- Statement of retained earnings
Correct answer: Income statement
The income statement (profit and loss statement) reports revenues and expenses over a defined accounting period to show net income or loss.
Question 4: A petty cash fund has a $200 limit. After reimbursements totaling $163, how much cash should remain in the fund?
- $163
- $37 (Correct answer)
- $200
- $363
Correct answer: $37
The remaining cash equals the fund limit minus total disbursements: $200 - $163 = $37.
Question 5: What does 'accounts receivable' represent on a company's balance sheet?
- Money owed to suppliers
- Money owed to the company by customers (Correct answer)
- Cash held in bank accounts
- Long-term investment assets
Correct answer: Money owed to the company by customers
Accounts receivable represents amounts owed to the business by customers for goods or services already delivered but not yet paid.
Question 6: Which cost remains constant regardless of the level of business activity or output?
- Variable cost
- Direct cost
- Fixed cost (Correct answer)
- Marginal cost
Correct answer: Fixed cost
Fixed costs, such as rent and salaries, do not change with production volume or business activity levels within a relevant range.
Question 7: An office administrator is reconciling the bank statement. Which item would appear as a deposit in transit?
- A check issued but not yet cashed by the vendor
- Cash received and recorded by the company but not yet on the bank statement (Correct answer)
- A bank fee charged this month
- An automatic payment processed by the bank
Correct answer: Cash received and recorded by the company but not yet on the bank statement
A deposit in transit is cash received and recorded in the company's books but not yet reflected in the bank statement.
COA COA Financial Management & Budgeting 4
Which budgeting approach starts from zero each period, requiring every expense to be justified regardless of prior budgets?