Which of the Following Is the Best Reason for Preparing

question 8

Multiple Choice

Which of the following is the best reason for preparing budgets for government entities on the cash basis?

• A) Cash basis budgeting helps to achieve interperiod equity.
• B) Cash basis budgeting helps to ensure that the government will receive no more in revenues than itis required to disburse.
• C) Cash basis budgeting helps a government plan to have cash on hand to pay bills
• D) Cash basis budgeting more accurately reflects the economic impact of fiscal activities.

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Definitions:

Planned Expenditures

Forecasted spending for specific purposes within a certain time frame, often categorized into operating or capital expenditures.

Cash Surpluses

Occurs when a company has more cash inflow than outflow, leading to excess liquidity.

Liquidity

The simplicity of turning an asset into cash without impacting its market value.

Money Market

A segment of the financial market where short-term financial instruments with high liquidity and short maturities are traded.