Business Studies

Budget

Q: The production department estimates raw material expenditure for the next quarter. This relates to which plan?

Budget The governing concept is that a budget is a numerical statement of expected income, expenditure, or resource requirements for a future period. The production department is estimating how much will be spent on raw materials in the next quarter, so the time period and financial amount are both central to the plan. Therefore, option B, Budget, is correct. An objective would state a desired production result, such as producing a specified quantity. A procedure would list the ordered steps for purchasing or using materials. A strategy would describe a broad approach for competing or achieving a major business aim. Because the question concerns a future monetary estimate, it is specifically a budget.

Q: A company fixes the estimated amount of research expenditure for the coming year. This relates to which plan?

Budget The governing concept is a budget as a plan expressed in numerical or monetary terms for a future period. The company has estimated and fixed the amount to be spent on research during the coming year, so the statement represents planned expenditure. An objective would state a desired result, such as completing a research project or improving product quality. A strategy would describe a broad approach for achieving an important aim, while a policy would guide recurring decisions. None of these alternatives specifically states a quantified amount of expenditure. The reference to an estimated monetary amount therefore makes Budget, option D, the unambiguous answer.

Q: A plan to keep 90000 rupees for advertising and 30000 rupees for content for a three-month digital campaign will be called what?

Budget A budget is a quantitative plan that expresses expected receipts, expenditure or allocation of resources for a specified period. The campaign assigns ₹90,000 to advertising and ₹30,000 to content for three months, so the total planned expenditure is ₹120,000. The figures are divided among purposes and tied to a time period, which are clear budget features. A policy would provide general guidance for decisions, a procedure would explain the ordered steps for conducting the campaign, and a rule would state a compulsory or prohibited action. None of those alternatives primarily represents monetary allocation. Therefore option A is correct because the plan converts the campaign’s resource requirements into specific financial amounts.

Q: Why is a budget called a quantitative plan in planning?

Because it expresses targets in numbers or money A budget shows targets in numbers such as money quantity or time. In exams treat quantitative plan as the identity of a budget.

Q: A company fixed the advertising expense limit for the next three months. This is an example of which plan?

Budget Fixing an expense limit in numerical form for a definite period is a budget. In exams connect expense limit questions with budget.

Q: What is the main reason for treating a budget as a single use plan?

It is prepared for a specific period or purpose A budget is prepared for a specific period or target so it is a single use plan. Remember period and purpose in exams.

Q: What does variance mean in budgetary control?

Difference between budget and actual result Variance is the difference between budgeted target and actual result. In exams understand variance as the result of comparison.

Q: If actual sales are lower than the budget what should the manager do most appropriately?

Examine reasons and take corrective steps Lower sales may show an adverse variance and reasons must be examined. Remember compare and correct in exams.

Q: Which information will be most useful while preparing a cash budget?

Cash receipts and payments Direct answer: Option A, cash receipts and payments. A cash budget forecasts the movement of cash during a period. Start with expected opening cash, add cash receipts such as sales collections, subtract cash payments such as wages, purchases and rent, and obtain the expected closing cash balance. Therefore option A supplies the essential information. Option B, an employee’s favourite language, may matter for communication but does not show cash inflow or outflow. Option C, wall colour, has no normal role in forecasting liquidity. Option D, a customer age list, may support marketing analysis, but it does not directly tell us when or how much cash will be received or paid. The cash budget helps management avoid shortages and plan surplus use. Exam cue: cash budget means cash inflows, cash outflows and liquidity.

Q: Why is the sales budget important while preparing a production budget?

Because production quantity may depend on sales estimates Production planning is affected by estimated sales demand. Remember the relation between sales budget and production budget in exams.

In Class 12 Business Studies, the topic Budget in the chapter Planning explains how an organisation expresses its expected activities and results in numerical terms for a specific period. Students learn how budgets support planning, coordination and control by setting targets, allocating resources and comparing actual performance with planned figures. The topic also helps them understand how deviations can guide corrective action and improve managerial decision-making.

Medium · Level 1 · 25 questions

Practice questions

01The production department estimates raw material expenditure for the next quarter. This relates to which plan?

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Answer and explanation

Correct answer: B. Budget

The governing concept is that a budget is a numerical statement of expected income, expenditure, or resource requirements for a future period. The production department is estimating how much will be spent on raw materials in the next quarter, so the time period and financial amount are both central to the plan. Therefore, option B, Budget, is correct. An objective would state a desired production result, such as producing a specified quantity. A procedure would list the ordered steps for purchasing or using materials. A strategy would describe a broad approach for competing or achieving a major business aim. Because the question concerns a future monetary estimate, it is specifically a budget.

Budget

Practice questions

04Why is a budget called a quantitative plan in planning?नियोजन में बजट को मात्रात्मक योजना क्यों कहा जाता है?

06What is the main reason for treating a budget as a single use plan?बजट को एकल प्रयोग योजना मानने का मुख्य कारण क्या है?

07What does variance mean in budgetary control?बजटीय नियंत्रण में विचलन का अर्थ क्या है?

08If actual sales are lower than the budget what should the manager do most appropriately?यदि वास्तविक बिक्री बजट से कम रही तो प्रबंधक को सबसे उचित क्या करना चाहिए?

09Which information will be most useful while preparing a cash budget?नकद बजट तैयार करते समय कौन सी जानकारी सबसे उपयोगी होगी?

10Why is the sales budget important while preparing a production budget?उत्पादन बजट बनाते समय बिक्री बजट क्यों महत्वपूर्ण होता है?

11In which situation is a flexible budget more useful than a fixed budget?लचीला बजट किस स्थिति में स्थिर बजट से अधिक उपयोगी होता है?

12Which budget can estimate the required quantity of raw material?किस बजट से कच्चे माल की आवश्यक मात्रा का अनुमान लगाया जा सकता है?

13What is the main purpose of a master budget?मास्टर बजट का मुख्य उद्देश्य क्या है?

14What is the correct meaning of zero based budgeting?शून्य आधारित बजट का सही अर्थ क्या है?

15A capital budget is most related to which decision?पूंजीगत बजट किस निर्णय से सबसे अधिक संबंधित है?

16Why is estimated market demand used while preparing a budget?बजट बनाते समय बाजार मांग के अनुमान का उपयोग किसलिए किया जाता है?

17Why does a budget committee ask different departments for budgets?बजट समिति अलग विभागों से बजट क्यों मंगवाती है?

18What problem may arise if a budget sets very easy targets?यदि बजट बहुत आसान लक्ष्य रखता है तो कौन सी समस्या हो सकती है?

19If a budget is too rigid what difficulty arises in changing conditions?यदि बजट बहुत कठोर हो तो बदलती परिस्थितियों में क्या कठिनाई आती है?

20What is the purpose of fixing responsibility centres in a budget?बजट में जिम्मेदारी केंद्र तय करने का उद्देश्य क्या है?

21What is the benefit of showing administrative expenses separately in an expense budget?व्यय बजट में प्रशासनिक खर्च अलग दिखाने का लाभ क्या है?

22If estimated payments are more than receipts in a cash budget what does it indicate?नकद बजट में अनुमानित भुगतान प्राप्तियों से अधिक हों तो क्या संकेत मिलता है?

23In which situation may budget revision become necessary?किस स्थिति में बजट संशोधन आवश्यक हो सकता है?

24What effect can participation in budgeting have on employee behaviour?बजट में भागीदारी से कर्मचारियों के व्यवहार पर क्या प्रभाव पड़ सकता है?

25When is corrective action taken in budgetary control?बजट नियंत्रण में सुधारात्मक कार्रवाई कब ली जाती है?

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Analytics choices

04Why is a budget called a quantitative plan in planning?

06What is the main reason for treating a budget as a single use plan?

07What does variance mean in budgetary control?

08If actual sales are lower than the budget what should the manager do most appropriately?

09Which information will be most useful while preparing a cash budget?

10Why is the sales budget important while preparing a production budget?

11In which situation is a flexible budget more useful than a fixed budget?

12Which budget can estimate the required quantity of raw material?

13What is the main purpose of a master budget?

14What is the correct meaning of zero based budgeting?

15A capital budget is most related to which decision?

16Why is estimated market demand used while preparing a budget?

17Why does a budget committee ask different departments for budgets?

18What problem may arise if a budget sets very easy targets?

19If a budget is too rigid what difficulty arises in changing conditions?

20What is the purpose of fixing responsibility centres in a budget?

21What is the benefit of showing administrative expenses separately in an expense budget?

22If estimated payments are more than receipts in a cash budget what does it indicate?

23In which situation may budget revision become necessary?

24What effect can participation in budgeting have on employee behaviour?

25When is corrective action taken in budgetary control?