1) A budget is a formal, quantitative expression of plans that provides a benchmark against which to measure actual performance.

2) A capital budget is a periodic business plan that includes a coordinated set of detailed operating schedules and financial statements.

3) An operating budget is the major part of a master budget, and focuses on the income statement and its supporting schedules.

4) Budgeting forces managers to think ahead and to anticipate and prepare for changing conditions.

5) The first step in preparing the master budget is the preparation of the budgeted income statement.

6) The cash budget is the first budget prepared in the master budget.

7) Budgeted purchases are equal to the cost of goods sold plus any beginning inventory.

8) A cash budget is a statement of planned cash receipts and cash disbursements.

9) Cash budgets help management to avoid having unnecessary idle cash on the one hand, and unnecessary cash deficiencies on the other.

10) The accuracy of estimated purchases budgets, production schedules, and costs depends on the detail and accuracy of the budgeted operating expenses.

11) A sales budget is a prediction of sales under a given set of conditions.

12) Participative budgeting is the active participation of all affected employees in the formulation of the budgets.

13) Financial planning models are mathematical models of the master budget that can react to any set of assumptions about sales, costs, or product mix.

14) Financial planning models are only as good as the assumptions and the inputs used to build and manipulate them.

15) The systematic varying of budget data input in order to determine the effects of each change on the budget is called operating analysis.

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