 In this presentation we will take a look at multiple choice questions related to budgeting, going through the questions and then practicing test taking skills with them. First question. First a word from our sponsor. Yeah actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but but that's okay whatever because our merchandise is better than their stupid stuff anyways. Like this CPA thinking cap for example. CPA thinking CAP you see what we did with like with the letters and this CPA thinking cap is not just for CPAs either. Anyone can and should have at least one possibly multiple CPA thinking caps. Why? Because based on our scientific survey of five people all of whom directly profit from the sale of these CPA thinking caps wearing this CPA thinking cap without a doubt according to the survey increases accounting productivity tenfold. Yeah at least. Yeah apparently the hat actually channels like accounting energy from the quantum field ether directly into your head allowing you to navigate spreadsheets faster. It's kind of like how in like the matrix when Neo learns kung fu or at least that's what the scientific survey's saying so get one because the scientific survey participants could really use some extra cash. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com which would be on a budgeted balance sheet a. Advertising expense b. Sales revenue c. Cost of goods sold d. Accounts receivable or e. All of the choices are correct let's go through this again using the process of elimination which would be on a budgeted balance sheet a. Advertising expense now the fact that it says expense would typically mean that it would be on the income statement and note that although we're talking about a budgeted balance sheet here most of the rules would generally apply we'd have budgeted income and budgeted expenses on an income statement budgeted assets liabilities and equity on the balance sheet so advertising expenses probably wouldn't be on the balance sheet that would be an income statement item b. Sales revenue once again that's an income statement item not a balance sheet item so that would typically not be there c. Says cost of goods sold that too is an income statement item not a balance sheet item so typically no d. Says accounts receivable that's a balance sheet item typically so i would think it would be on the budgeted balance sheet if we're talking about budgeted accounts receivable and then last one says all the choices are correct and we've eliminated three of them and therefore that is not the case and it looks like d is our final answer final answer which would be on a budgeted balance sheet d accounts receivable next question which is not completed before a cash budget is prepared a a capital expenditures budget b sales budget c merchandise purchases budget d general and administrative expense budget and e budgeted income statement so let's go through this again using the process of elimination which is not completed before a cash budget is prepared so we have to do this which is not completed before we do the cash budget we're imagining the order with which we do the budgets we have to do the budgets in some type of order so that we don't get out of whack out of sequence and we do this in a systematic way so the cash budget is kind of near the end we're at the like the lower third of the budgeting process we're going to have to do a lot of stuff before the cash budget typically let's go through these and see which of these we would not have to do before the cash budget in other words what's kind of like the final stuff we got to do in the budgeting process a capital expenditures budget and it's not one of the first things we do but i don't know if we do it before the the cash budget we'll have to keep it for now because you think we might capitals by buying property plant and equipment and you would think maybe we use cash for that so maybe we'd have to do that before the cash budget let's keep that for now the second one says this sales budget well i know that's one of the first things we do so we definitely do that before the cash budget because that's like on the top of the list and cash budgets on the bottom third c says merchandise purchase budget and again that's something we do pretty early on because we got to decide how much merchandise we're going to purchase so i'm going to say that that one uh is not it d says general and administrative budget nah that one's kind of later on we do that possible it's not one of the first things we do so i'll keep that now and then e says budgeted income statement so i'll keep that because that seems like one of the last things we do we're at like the financial statements to budgeted financial statements balance sheet income statement so let's keep a d and e go through it again which is not completed before a cash budget is prepared either a capital expenditures budget d general and administrative expense budget or e budgeted income statement of those three if i'm just imagining what the last thing we're going to do is i would think e is the last thing we're going to do so of all of these i would just consider the fact that the the final product that we're going to have is going to be basically the balance sheet and income statement typically and therefore um we don't it can't be the case that we would have to do that before the cash budget so the cash budgets towards the end but the final product kind of is the is the financial statements or the budgeted financial statements so i would think e final answer which is not completed before a cash budget is prepared e budgeted income statement next question which is not used in to prepare a cash budget for november which is not used to prepare a cash budget for november a beginning cash balance on november first b budgeted sales and collections for november c estimated depreciation expense for november d budgeted salaries expense for november and e budgeted capital equipment purchases for november all right let's go through this again process of elimination which is what we will apply which is not used to prepare a cash budget for november a so we're on the cash budget we're on the month of november a beginning cash balance on november first well if we're going to prepare a cash budget we got to start somewhere we're not starting at zero typically unless it's the first month of budgeting we're starting at the beginning balance as of the beginning of the month november first so i would think we would need that so that's not it be budgeted sales and collections for november well we're doing a cash budget we're going to need sales and we're going to need collections we're going to need the cash coming in cash going out so i would think that that we would need that then c says estimated depreciation expense for november and you might run through these and say well that's normal that's normal because but depreciation notice is not a cash item they love books love asking this question because really this is a question that tests a cruel items versus cash items we're on the cash budget the depreciation expense has no cash involved we debit depreciation expense we credit accumulated depreciation we spent the cash in the past when we purchased the equipment the act of us recording the depreciation involves no cash and therefore not on the cash budget so as soon as we see something like depreciation something that does not involve cash that's you know usually going to be the one and oftentimes it is depreciation is is a common practice and these multiple choice questions to to put in there with the cash budget it's common mistake that's actually made as well like because it's on the income statement as an expense but there's no cash it's kind of like a cash flow statement and then d says budgeted salaries expense for november and notice it says salaries expense and not cash paid so we might say hmm it's got expense but not paid but i'm i'm going with with c here and then e says budgeted capital equipment purchases and again it doesn't really say whether we we purchase with cash or not but clearly we would have to consider any cash payments for capital expenditures those would be things like property plant and equipment that would be purchased pp and e so i'm going to say final answer c which is not used to prepare a cash budget for november c estimated depreciation expense for november