CPS CPS Financial Management & Budgeting 1 — Questions and Answers
Question 1: Which financial document summarizes an organization's revenues, expenses, and net income over a specific period?
- Balance sheet
- Income statement (Correct answer)
- Cash flow statement
- Accounts payable ledger
Correct answer: Income statement
An income statement (profit and loss statement) summarizes revenues and expenses to show net income over a reporting period.
Question 2: What is petty cash typically used for in an office setting?
- Paying employee salaries
- Covering small, miscellaneous office expenses (Correct answer)
- Processing vendor invoices
- Managing capital expenditures
Correct answer: Covering small, miscellaneous office expenses
Petty cash is a small, on-hand cash fund used to reimburse minor expenses such as postage or office supplies without cutting a formal check.
Question 3: When reconciling a bank statement, what does an 'outstanding check' refer to?
- A check that has been cashed and cleared the bank
- A check issued but not yet cleared by the bank (Correct answer)
- A check returned for insufficient funds
- A check voided by the issuer
Correct answer: A check issued but not yet cleared by the bank
An outstanding check has been written and recorded in the company's books but has not yet been processed and cleared by the bank.
Question 4: Which term describes the process of comparing internal financial records to an external statement to ensure they match?
- Auditing
- Reconciliation (Correct answer)
- Depreciation
- Accrual
Correct answer: Reconciliation
Reconciliation is the process of ensuring that two sets of records (such as a company ledger and a bank statement) agree and are consistent.
Question 5: An accounts payable function primarily involves managing:
- Money owed to the company by customers
- Money the company owes to its vendors and suppliers (Correct answer)
- Employee payroll records
- Investment portfolio tracking
Correct answer: Money the company owes to its vendors and suppliers
Accounts payable refers to the short-term liabilities a company owes to its creditors and suppliers for goods or services received.
Question 6: What is the primary purpose of a budget variance report?
- To forecast future revenues only
- To compare actual financial results against the planned budget (Correct answer)
- To list all outstanding invoices
- To calculate employee tax withholdings
Correct answer: To compare actual financial results against the planned budget
A budget variance report highlights the difference between budgeted figures and actual performance, helping management identify areas needing attention.
CPS CPS Financial Management & Budgeting 1
Which financial document summarizes an organization's revenues, expenses, and net income over a specific period?