A Static Budget

question 32

Multiple Choice

A static budget:

• A) is based totally on prior year's costs.
• B) is based on one anticipated activity level.
• C) is based on a range of activity.
• D) is preferred over a flexible budget in the evaluation of performance.
• E) presents a clear measure of performance when planned activity differs from actual activity.

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Definitions:

Nominal Accounts

Accounts that are closed at the end of every accounting period, which include revenues, expenses, gains, and losses.

Real Accounts

Permanent accounts in accounting that show the ongoing financial state of a company's assets, liabilities, and shareholders' equity.

Accounting Period

A specific period of time used for financial reporting, such as a month, quarter, or year.

Prepaid Rent

An advance payment for rent that is recorded as an asset on the balance sheet until it is consumed.