CPS CPS Financial Management and Budgeting 2 — Questions and Answers
Question 1: Accounts payable represents money that a company:
- Is owed by customers
- Owes to suppliers (Correct answer)
- Has in the bank
- Has invested in assets
Correct answer: Owes to suppliers
Accounts payable is a liability account representing amounts a company owes to vendors or suppliers for goods and services received but not yet paid.
Question 2: A professional secretary is asked to reconcile the bank statement. What is the primary purpose of this task?
- To prepare the annual tax return
- To ensure the company's cash records match the bank's records (Correct answer)
- To project next month's cash needs
- To audit vendor invoices
Correct answer: To ensure the company's cash records match the bank's records
Bank reconciliation ensures the company's internal cash records agree with the bank statement, catching errors and unrecorded transactions.
Question 3: Which document formally authorizes a department to spend money up to a specified limit?
- Purchase requisition
- Purchase order
- Budget appropriation (Correct answer)
- Expense report
Correct answer: Budget appropriation
A budget appropriation is the formal authorization that allows a department to spend funds up to an approved limit during a budget period.
Question 4: Fixed costs in a departmental budget are best described as costs that:
- Change proportionally with output
- Remain constant regardless of activity level (Correct answer)
- Vary based on headcount only
- Are discretionary and easily cut
Correct answer: Remain constant regardless of activity level
Fixed costs remain constant over a relevant range of activity, such as rent or salaried employee costs, regardless of production or output volume.
Question 5: An expense report submitted by an employee should be verified against which supporting documents?
- Only the employee's written statement
- Original receipts and company travel policy (Correct answer)
- The department budget only
- Prior year expense reports
Correct answer: Original receipts and company travel policy
Expense reports must be supported by original receipts and verified against company travel and expense policy to ensure compliance and accuracy.
Question 6: What is the purpose of a chart of accounts in financial record-keeping?
- To list all bank accounts held by the company
- To provide a systematic index of all financial accounts used in the general ledger (Correct answer)
- To summarize monthly bank reconciliations
- To track employee reimbursements
Correct answer: To provide a systematic index of all financial accounts used in the general ledger
A chart of accounts is a structured list of all accounts in the general ledger, assigned numerical codes to organize financial transactions by category.
CPS CPS Financial Management and Budgeting 2
Accounts payable represents money that a company: