In this page you will get more than 100 MCQs on budget and budgetary control. Also you will get here Production Budget MCQs, Flexible Budget MCQ,Sales Budgets MCQs and cash budget mcqs.
[MCQs on Budget and Budgetary Control, MCQ on Budgets,Sales Budgets MCQs, Production Budget MCQs,Management Accounting MCQ, Flexible Budget MCQ]
![Budget and Budgetary Control MCQs [Multiple Choice Questions and Answers On Budget and Budgetary Control]](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTHLzptUtt7nSE8jRgpp39lrY0WjEjwyP4jxaZdDwliQ3TPevEN7ebHMX52QFiMoCzZ5es1puzIrIhwmpnMANm4H-gABHoOeBOQPPmZUO9ruDbDYNi1_vp-PiowoWsIKS3LQ1QpPir0rRiBr0-rVez9hWg51scKUV2QxxAvEcwyvTezTvrILEwYLMnWQZZ/s971/Screenshot_2025-03-19-13-36-28-75_c0d35d5c8ea536686f7fb1c9f2f8f274.jpg "Budget and Budgetary Control MCQs [Multiple Choice Questions and Answers On Budget and Budgetary Control]")
100 MCQs on Budget and Budgetary Control
1). A budget is best described as:
a) A historical financial record
b) A quantitative plan for the future
c) A statement of actual expenses
d) A tax computation tool
Answer: b) A quantitative plan for the future
2). Budgetary control involves:
a) Preparing budgets only
b) Comparing actual results with budgeted figures
c) Ignoring variances in performance
d) Focusing solely on past data
Answer: b) Comparing actual results with budgeted figures
3). The primary purpose of a budget is to:
a) Control costs and achieve goals
b) Increase company debt
c) Avoid financial planning
d) Reduce employee morale
Answer: a) Control costs and achieve goals
4). Who is typically responsible for preparing a budget in an organization?
a) External auditors
b) Management and department heads
c) Shareholders
d) Customers
Answer: b) Management and department heads
5). The time period covered by a budget is usually:
a) One day
b) One week
c) One month to one year
d) Ten years
Answer: c) One month to one year
6). A budget prepared for a single level of activity is called:
a) Flexible Budget
b) Fixed Budget
c) Rolling Budget
d) Zero-Based Budget
Answer: b) Fixed Budget
7). A flexible budget adjusts to:
a) Changes in tax rates
b) Variations in activity levels
c) Fixed costs only
d) Historical data
Answer: b) Variations in activity levels
8). Which budget forecasts cash inflows and outflows?
a) Sales Budget
b) Cash Budget
c) Production Budget
d) Capital Budget
Answer: b) Cash Budget
9). The master budget includes:
a) Only the sales budget
b) All operational and financial budgets
c) Only the cash budget
d) Tax records
Answer: b) All operational and financial budgets
10). A budget that starts from scratch every period is:
a) Incremental Budget
b) Zero-Based Budget
c) Fixed Budget
d) Rolling Budget
Answer: b) Zero-Based Budget
11). A rolling budget is:
a) Fixed for a single period
b) Continuously updated by adding a new period
c) Prepared without any planning
d) Based only on fixed costs
Answer: b) Continuously updated by adding a new period
12). The sales budget is usually the starting point for:
a) Cash Budget
b) Production Budget
c) Master Budget
d) Overhead Budget
Answer: c) Master Budget
13). A capital expenditure budget is prepared for:
a) Day-to-day operations
b) Long-term investments in assets
c) Short-term cash flow
d) Employee salaries
Answer: b) Long-term investments in assets
14). Which budget focuses on manufacturing costs?
a) Sales Budget
b) Production Budget
c) Overhead Budget
d) Cash Budget
Answer: b) Production Budget
15). A budget that focuses on revenue-generating activities is:
a) Sales Budget
b) Cash Budget
c) Production Budget
d) Overhead Budget
Answer: a) Sales Budget
16). Budgetary control helps in:
a) Avoiding financial planning
b) Coordinating departments
c) Increasing unnecessary expenses
d) Ignoring performance evaluation
Answer: b) Coordinating departments
17). A variance in budgetary control is:
a) The budgeted profit
b) The difference between actual and budgeted figures
c) The total revenue
d) The fixed cost
Answer: b) The difference between actual and budgeted figures
18). A favorable variance occurs when:
a) Actual costs exceed budgeted costs
b) Actual revenue exceeds budgeted revenue
c) Actual production is less than budgeted
d) Actual expenses equal budgeted expenses
Answer: b) Actual revenue exceeds budgeted revenue
19). An unfavorable variance indicates:
a) Better-than-expected performance
b) Actual costs exceeding budgeted costs
c) No difference between actual and budgeted figures
d) Increased employee morale
Answer: b) Actual costs exceeding budgeted costs
20). The process of analyzing variances is part of:
a) Budget preparation
b) Budgetary control
c) Tax filing
d) Financial auditing
Answer: b) Budgetary control
21). One key objective of budgeting is to:
a) Increase waste of resources
b) Provide a basis for performance evaluation
c) Avoid financial accountability
d) Reduce coordination among departments
Answer: b) Provide a basis for performance evaluation
22). Budgeting encourages:
a) Random decision-making
b) Goal congruence among departments
c) Financial mismanagement
d) Ignoring organizational goals
Answer: b) Goal congruence among departments
23). An advantage of budgetary control is:
a) Increased inefficiency
b) Early detection of deviations
c) Higher tax liability
d) Reduced transparency
Answer: b) Early detection of deviations
24). Budgets help managers to:
a) Avoid planning
b) Allocate resources efficiently
c) Increase unnecessary spending
d) Ignore performance
Answer: b) Allocate resources efficiently
25). Budgetary control improves:
a) Financial discipline
b) Employee absenteeism
c) Tax evasion
d) Resource wastage
Answer: a) Financial discipline
26). A limitation of budgeting is:
a) It promotes coordination
b) It may lead to rigidity
c) It aids in decision-making
d) It improves accountability
Answer: b) It may lead to rigidity
27). Budgets based on inaccurate forecasts may result in:
a) Better resource allocation
b) Unrealistic targets
c) Improved performance
d) Higher profits
Answer: b) Unrealistic targets
28). One challenge of budgetary control is:
a) It requires no effort
b) Resistance from employees
c) It eliminates variances
d) It reduces planning time
Answer: b) Resistance from employees
29). Overemphasis on budgets may lead to:
a) Improved flexibility
b) Neglect of qualitative factors
c) Better coordination
d) Increased accuracy
Answer: b) Neglect of qualitative factors
30). A disadvantage of fixed budgets is:
a) They adapt to changes
b) They are inflexible to activity variations
c) They are easy to prepare
d) They improve control
Answer: b) They are inflexible to activity variations
31). The sales budget is based on:
a) Production capacity
b) Sales forecasts
c) Cash availability
d) Tax rates
Answer: b) Sales forecasts
32). The production budget depends on:
a) Sales budget and inventory levels
b) Cash inflows
c) Tax policies
d) Employee salaries
Answer: a) Sales budget and inventory levels
33). A cash budget helps to:
a) Avoid cash shortages
b) Increase debt
c) Reduce production
d) Ignore expenses
Answer: a) Avoid cash shortages
34). In a manufacturing firm, the overhead budget includes:
a) Direct materials
b) Indirect costs like utilities
c) Sales revenue
d) Cash inflows
Answer: b) Indirect costs like utilities
35). The capital budget is reviewed:
a) Daily
b) Monthly
c) Annually or for long-term projects
d) Never
Answer: c) Annually or for long-term projects
36). Zero-based budgeting requires:
a) Justification of all expenses from scratch
b) Incremental increases from last year
c) Fixed cost allocation
d) No planning
Answer: a) Justification of all expenses from scratch
37). Incremental budgeting is based on:
a) Previous year’s budget with adjustments
b) Zero starting point
c) Fixed activity levels
d) Cash flow only
Answer: a) Previous year’s budget with adjustments
38). A rolling budget is also known as:
a) Static Budget
b) Continuous Budget
c) Fixed Budget
d) Master Budget
Answer: b) Continuous Budget
39). The cash budget does NOT include:
a) Cash sales
b) Depreciation
c) Loan repayments
d) Cash purchases
Answer: b) Depreciation
40). A favorable sales variance occurs when:
a) Actual sales are less than budgeted
b) Actual sales exceed budgeted sales
c) Costs increase unexpectedly
d) Production decreases
Answer: b) Actual sales exceed budgeted sales
41). Budgetary slack refers to:
a) Overestimating revenues
b) Underestimating costs or overestimating resources
c) Accurate forecasting
d) Efficient resource use
Answer: b) Underestimating costs or overestimating resources
42). The first step in budgetary control is:
a) Analyzing variances
b) Setting budgeted targets
c) Ignoring performance
d) Reducing expenses
Answer: b) Setting budgeted targets
43). A budget committee is responsible for:
a) Auditing financial statements
b) Coordinating and reviewing budgets
c) Increasing taxes
d) Reducing production
Answer: b) Coordinating and reviewing budgets
44). Flexible budgets are most useful in:
a) Stable industries
b) Industries with fluctuating activity levels
c) Tax planning
d) Fixed cost industries
Answer: b) Industries with fluctuating activity levels
45). The operating budget includes:
a) Sales, production, and expense budgets
b) Only capital expenditures
c) Only cash inflows
d) Tax budgets
Answer: a) Sales, production, and expense budgets
46). A budget that covers all aspects of an organization is called:
a) Sales Budget
b) Master Budget
c) Cash Budget
d) Overhead Budget
Answer: b) Master Budget
47). Budgetary control ensures:
a) No deviations occur
b) Deviations are identified and corrected
c) Budgets are ignored
d) Costs are uncontrolled
Answer: b) Deviations are identified and corrected
48). A production budget is expressed in:
a) Monetary terms
b) Units of output
c) Cash flows
d) Tax rates
Answer: b) Units of output
49). The cash budget is prepared:
a) After the sales and production budgets
b) Before the sales budget
c) Without any data
d) Only annually
Answer: a) After the sales and production budgets
50). A key feature of zero-based budgeting is:
a) It relies on historical data
b) It justifies every expense anew
c) It avoids planning
d) It increases costs
Answer: b) It justifies every expense anew
51). The difference between a fixed budget and a flexible budget is:
a) Fixed budgets adjust to activity levels
b) Flexible budgets adjust to activity levels
c) Fixed budgets are more accurate
d) Flexible budgets are static
Answer: b) Flexible budgets adjust to activity levels
52). Budgetary control is a tool for:
a) Long-term investment
b) Performance evaluation and correction
c) Tax evasion
d) Reducing revenue
Answer: b) Performance evaluation and correction
53). A budget variance can be:
a) Favorable or unfavorable
b) Always favorable
c) Always unfavorable
d) Ignored completely
Answer: a) Favorable or unfavorable
54). The overhead budget includes:
a) Direct labor costs only
b) Indirect costs like rent and utilities
c) Sales revenue
d) Cash inflows
Answer: b) Indirect costs like rent and utilities
55). A cash budget helps in:
a) Planning long-term investments
b) Managing liquidity
c) Increasing debt
d) Reducing production
Answer: b) Managing liquidity
56). Budget preparation requires:
a) No coordination
b) Accurate forecasting and planning
c) Random estimates
d) Ignoring goals
Answer: b) Accurate forecasting and planning
57). A limitation of incremental budgeting is:
a) It encourages efficiency
b) It may perpetuate past inefficiencies
c) It starts from zero
d) It is highly flexible
Answer: b) It may perpetuate past inefficiencies
58). The sales budget influences:
a) Production and cash budgets
b) Only the cash budget
c) Only the capital budget
d) Tax budgets
Answer: a) Production and cash budgets
59). A favorable cost variance occurs when:
a) Actual costs exceed budgeted costs
b) Actual costs are less than budgeted costs
c) Revenue decreases
d) Production stops
Answer: b) Actual costs are less than budgeted costs
60). Budgetary control relies on:
a) Feedback and corrective action
b) Ignoring variances
c) Random decisions
d) No planning
Answer: a) Feedback and corrective action
61). A rolling budget is suitable for:
a) Stable environments
b) Dynamic and changing environments
c) Fixed cost industries
d) Tax planning
Answer: b) Dynamic and changing environments
62). The master budget is prepared:
a) Before operational budgets
b) After individual operating budgets
c) Without any data
d) Only for cash flows
Answer: b) After individual operating budgets
63). Budgetary slack can lead to:
a) Efficient resource use
b) Misallocation of resources
c) Accurate forecasts
d) Better coordination
Answer: b) Misallocation of resources
64). A flexible budget is prepared:
a) For a single activity level
b) For multiple activity levels
c) Without any data
d) Only for fixed costs
Answer: b) For multiple activity levels
65). The production budget ensures:
a) Sales targets are met
b) Cash is available
c) Taxes are paid
d) Revenue increases
Answer: a) Sales targets are met
66). A capital budget focuses on:
a) Short-term expenses
b) Long-term asset acquisition
c) Daily cash flows
d) Employee salaries
Answer: b) Long-term asset acquisition
67). Budgetary control helps in:
a) Avoiding accountability
b) Monitoring performance
c) Increasing waste
d) Reducing planning
Answer: b) Monitoring performance
68). A cash budget prevents:
a) Overproduction
b) Cash shortages or surpluses
c) Sales growth
d) Tax payments
Answer: b) Cash shortages or surpluses
69). The sales budget is expressed in:
a) Units and monetary terms
b) Only units
c) Only cash
d) Fixed costs
Answer: a) Units and monetary terms
70). A limitation of zero-based budgeting is:
a) It is time-consuming
b) It relies on past data
c) It avoids planning
d) It reduces costs automatically
Answer: a) It is time-consuming
71). Budgetary control improves:
a) Tax evasion
b) Organizational efficiency
c) Employee absenteeism
d) Random spending
Answer: b) Organizational efficiency
72). A fixed budget is most suitable for:
a) Stable conditions
b) Fluctuating activity levels
c) Dynamic industries
d) Unpredictable markets
Answer: a) Stable conditions
73). The overhead budget is part of:
a) The operating budget
b) The capital budget
c) The cash budget
d) The tax budget
Answer: a) The operating budget
74). A favorable variance in production occurs when:
a) Actual output exceeds budgeted output
b) Actual output is less than budgeted
c) Costs increase
d) Revenue decreases
Answer: a) Actual output exceeds budgeted output
75). Budgetary control requires:
a) No monitoring
b) Regular comparison of actual vs. budgeted results
c) Ignoring variances
d) Random planning
Answer: b) Regular comparison of actual vs. budgeted results
76). A cash budget is critical for:
a) Long-term planning
b) Short-term liquidity management
c) Tax evasion
d) Reducing sales
Answer: b) Short-term liquidity management
77). The production budget is prepared after:
a) The cash budget
b) The sales budget
c) The capital budget
d) The overhead budget
Answer: b) The sales budget
78). A flexible budget helps in:
a) Evaluating performance under varying conditions
b) Fixing costs permanently
c) Ignoring variances
d) Reducing revenue
Answer: a) Evaluating performance under varying conditions
79). Budgetary slack is often introduced by:
a) Accurate forecasting
b) Managers to make targets easier
c) External auditors
d) Tax authorities
Answer: b) Managers to make targets easier
80). The master budget integrates:
a) Only financial budgets
b) Operating and financial budgets
c) Only cash budgets
d) Tax budgets
Answer: b) Operating and financial budgets
81). A limitation of budgetary control is:
a) It improves coordination
b) It cannot predict all external factors
c) It enhances efficiency
d) It reduces costs automatically
Answer: b) It cannot predict all external factors
82). A sales budget is influenced by:
a) Market demand and pricing
b) Fixed costs only
c) Cash inflows
d) Tax rates
Answer: a) Market demand and pricing
83). The cash budget includes:
a) Depreciation expenses
b) Cash receipts and payments
c) Only sales revenue
d) Long-term investments
Answer: b) Cash receipts and payments
84). A rolling budget ensures:
a) Fixed planning
b) Continuous planning
c) No updates
d) Reduced costs
Answer: b) Continuous planning
85). Budgetary control is ineffective without:
a) Accurate budgets and monitoring
b) Random estimates
c) Ignoring variances
d) No planning
Answer: a) Accurate budgets and monitoring
86). A production budget helps in:
a) Managing inventory levels
b) Increasing debt
c) Reducing sales
d) Avoiding cash flow
Answer: a) Managing inventory levels
87). The capital budget is used to:
a) Plan short-term expenses
b) Evaluate long-term investments
c) Manage daily operations
d) Reduce revenue
Answer: b) Evaluate long-term investments
88). A favorable variance improves:
a) Costs only
b) Profitability or efficiency
c) Debt levels
d) Tax liability
Answer: b) Profitability or efficiency
89). The overhead budget is based on:
a) Sales forecasts
b) Production activity levels
c) Cash inflows
d) Tax rates
Answer: b) Production activity levels
90). Budgetary control promotes:
a) Accountability and responsibility
b) Random spending
c) Tax evasion
d) Reduced planning
Answer: a) Accountability and responsibility
91). A fixed budget assumes:
a) Constant activity levels
b) Variable activity levels
c) No planning
d) Random costs
Answer: a) Constant activity levels
92). The sales budget affects:
a) Production and purchasing plans
b) Only cash inflows
c) Only fixed costs
d) Tax policies
Answer: a) Production and purchasing plans
93). A cash budget is reviewed:
a) Annually
b) Frequently (e.g., monthly or weekly)
c) Never
d) Only at year-end
Answer: b) Frequently (e.g., monthly or weekly)
94). Zero-based budgeting is most useful when:
a) Resources are limited
b) Past data is reliable
c) Costs are fixed
d) Planning is avoided
Answer: a) Resources are limited
95). A flexible budget is NOT suitable for:
a) Stable environments
b) Fluctuating activity levels
c) Performance evaluation
d) Cost control
Answer: a) Stable environments
96). Budgetary control identifies:
a) Only favorable variances
b) Both favorable and unfavorable variances
c) Only costs
d) Only revenue
Answer: b) Both favorable and unfavorable variances
97). The master budget is a:
a) Short-term plan only
b) Comprehensive financial plan
c) Cash-only plan
d) Tax plan
Answer: b) Comprehensive financial plan
98). A limitation of rolling budgets is:
a) They require constant updates
b) They are static
c) They reduce planning
d) They avoid variances
Answer: a) They require constant updates
99). The production budget is linked to:
a) Sales targets and inventory needs
b) Cash inflows only
c) Tax payments
d) Fixed costs
Answer: a) Sales targets and inventory needs
100). Budgetary control is a continuous process of:
a) Planning, monitoring, and correcting
b) Ignoring performance
c) Reducing revenue
d) Avoiding coordination
Answer: a) Planning, monitoring, and correcting
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