A Disadvantage of Static Budgets Is That They

question 174

Multiple Choice

A disadvantage of static budgets is that they:

• A) are dependent on previous year's actual results
• B) cannot be used by service companies
• C) do not show possible changes in underlying activity levels
• D) show the expected results of a responsibility center for several levels of activity

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Definitions:

Customer Accounts

Accounts maintained by a vendor detailing individual transactions with customers over a period, showing credits, debits, and balances.

Controlling Account

A general ledger account that summarizes and controls the balance of all subsidiary accounts related to it, typically used for accounts receivable and accounts payable.

Subsidiary Ledger

A detailed ledger containing individual accounts that support figures on the general ledger, often used for accounts receivable, accounts payable, etc.

Merchandise Inventory

Goods that a company owns and intends to sell as part of its primary business operations, valued either at cost or market value on the balance sheet.