CPS Financial Management and Budgeting Flashcards

Which financial document summarizes a company's revenues, expenses, and net income over a specific period?

Answer: Income statement

An income statement (also called a profit and loss statement) reports revenues, expenses, and net income for a given accounting period.

A professional secretary processing a vendor invoice should first verify that a matching document exists. What is this three-way matching process?

Answer: Purchase order, invoice, and receiving report

Three-way matching compares the purchase order, vendor invoice, and receiving report to ensure the goods ordered were received and billed correctly.

What term describes the accounting method where revenue is recorded when earned and expenses when incurred, regardless of cash movement?

Answer: Accrual basis accounting

Accrual basis accounting records transactions when they occur economically, not when cash changes hands, providing a more accurate financial picture.

When preparing a departmental budget, which type of budget starts from zero each cycle and requires justification for every expense?

Answer: Zero-based budget

Zero-based budgeting requires each expense to be justified from scratch each budget period, regardless of prior year spending.

A petty cash fund is established with $200. After several small purchases, the fund holds $47 in cash and $153 in receipts. The fund is:

Answer: In balance

A petty cash fund is in balance when the remaining cash plus all receipts equals the original fund amount ($47 + $153 = $200).

Which of the following is the correct formula for calculating a budget variance?

Answer: Actual amount − Budgeted amount

Budget variance is calculated by subtracting the budgeted amount from the actual amount; a positive result is unfavorable (overspent) for expenses.