Question

Which of the following statements is NOT correct concerning the Cash Budget? 

A) The Cash Budget builds on earlier budgets and schedules as well as additional data. 

B) The Cash Budget should be prepared before the Budgeted Income Statement. 

C) The Cash Budget should be prepared before the Budgeted Balance Sheet. 

D) It is not necessary to prepare any other budgets before preparing the Cash Budget

Answer 1

--The correct answer is Option 'D" It is not necessary to prepare any other Budgets before preparing the Cash Budget is NOT a CORRECT STATEMENT.

--This is because the Cash Budget contains information based on various other budgets to be prepared before its preparation like:
>Direct material purchase budgeted,
>Sales Budget
>Direct Labor Budget
>Overhead budget, etc.

--Cash Budget cannot be prepared unless first these budgets are prepared.