ECONOMICS
BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Sales revenue
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Depreciation of machinery
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Wages
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Machinery bought on lease
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Detailed explanation-1: -Depreciation expense cannot be obtained from the cash budget, since it does not constitute a cash flow.
Detailed explanation-2: -Answer and Explanation: The correct answer to the given question is option (a) Depreciation expense.
Detailed explanation-3: -Depreciation is a monthly expense allowed by accounting standards to reduce the value of a company’s assets. This figure is a non-cash expense, meaning the company is not actually spending cash. Therefore, depreciation does not fit into the cash budget, which tracks all real cash inflows and outflows.
Detailed explanation-4: -What Expenses Should Be Included in a Cash Budget? A cash budget should take into account expected cash flows, such as revenue, as well as operational outflows due to returns, payroll, rent, utilities, supplies, and other costs of running the business.