A cash budget will have value only if it is actually used and:
A) careful records of actual income and expenses are kept.
B) spending never deviates from the budgeted amount.
C) it reflects actual financial position.
D) it takes into account only credit transactions.
E) all liabilities are paid.

Question

Quizplus · Accepted Answer

A cash budget is a useful tool for managing cash flow, but it is only effective if accurate records of income and expenses are kept to compare with the budgeted amounts. This allows for adjustments to be made to the budget as needed and for better financial management overall. Option B is not feasible as spending may deviate from the budgeted amount due to unforeseen circumstances. Option C is a given since a cash budget reflects the actual financial position, which is the purpose of having a budget. Option D is incorrect as a cash budget should take into account all transactions, including credit transactions. Option E is not relevant to the proper use of a cash budget.

A Cash Budget Will Have Value Only If It Is