Which of the Following Statements Is Correct

question 25

Multiple Choice

Which of the following statements is correct?

• A) Shorter term cash budgets, in general, are used primarily for planning purposes while longer term budgets are used for actual cash control.
• B) The cash budget and the capital budget are planned separately and although they are both important to the firm, they are independent of each other.
• C) Since deprecation is a non-cash charge, it does not appear on nor have an effect on the cash budget.
• D) The target cash balance is set optimally such that it need not be adjusted for seasonal patterns and unanticipated fluctuations in receipts, although it is changed to reflect long-term changes in the firm's operations.
• E) The typical actual cash budget will reflect interest on loans and income from investment of surplus cash. These numbers are expected values and actual results might turn out differently.

---

Definitions:

Periodic Inventory System

An accounting method where inventory levels and cost of goods sold are determined at set periods, rather than continuously tracked.

Journal Entry

A record in accounting that represents a transaction with debit and credit amounts recorded in the ledger to maintain financial records.

Retail Business

A type of business that sells products directly to consumers, typically through various distribution channels.

Service Business

An enterprise offering services or intangible items to its clientele instead of material goods.