Budget

Q: If departmental budgets do not match each other what problem is indicated?

Lack of coordination Departmental budgets should support one another because departments are parts of the same organisation. Sales expectations affect production, production affects purchasing, and all of these affect finance and cash requirements. If the figures, assumptions, or schedules in different budgets conflict, the organisation may order too much or too little, set unrealistic targets, or allocate funds incorrectly. Such inconsistency usually points to weak communication and coordination during planning. Therefore, a mismatch among departmental budgets indicates lack of coordination, making option A correct. It does not guarantee profit; instead, it may create waste, delays, or shortages. It also cannot mean that costs have ended or that a policy has succeeded. Integrated budgeting requires departments to share information and align their estimates with the common organisational plan. Hence A follows directly from the purpose of coordinated planning.

Q: Why will control be difficult if targets in a budget are not measurable?

Because comparison with actual result will be difficult Without measurable targets it is difficult to identify variance. Treat measurable targets as a condition for control in exams.

Q: Why is a budget called a basis of control?

Because it provides a standard for comparison A budget gives fixed targets against which actual results are compared. Remember budget as standard in exams.

Q: Why is it necessary to identify the key limiting factor while preparing a budget?

Because it may decide the limit of production or sales A limiting factor such as material or demand can affect budget targets. Treat key factor as a budget base in exams.

Q: If demand is limited which budget should be prepared first?

Sales budget When demand is limited the sales budget can become the base for other budgets. Link demand constraint with sales budget in exams.

Q: What is a budget manual used for?

To state rules and responsibilities of budgeting process A budget manual clarifies the process of preparing and implementing budgets. Link manual with guidelines in exams.

Q: Deliberately showing higher expenses and lower income in a budget may be an example of which problem?

Budget slack Budget slack means deliberately loose estimates to make targets easier. In exams link slack with unethical budgeting.

Q: Why can performance evaluation become weak if budget targets are too easy?

Because targets may appear achieved with little effort Easy targets do not show real efficiency properly. Remember challenging yet realistic target in exams.

Q: What should be considered while selecting the budget period?

Nature of business and need for control Budget period is chosen according to business nature and review need. Remember period suitability in exams.

01If departmental budgets do not match each other what problem is indicated?

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Answer and explanation

Correct answer: A. Lack of coordination

Departmental budgets should support one another because departments are parts of the same organisation. Sales expectations affect production, production affects purchasing, and all of these affect finance and cash requirements. If the figures, assumptions, or schedules in different budgets conflict, the organisation may order too much or too little, set unrealistic targets, or allocate funds incorrectly. Such inconsistency usually points to weak communication and coordination during planning.

Therefore, a mismatch among departmental budgets indicates lack of coordination, making option A correct. It does not guarantee profit; instead, it may create waste, delays, or shortages. It also cannot mean that costs have ended or that a policy has succeeded. Integrated budgeting requires departments to share information and align their estimates with the common organisational plan. Hence A follows directly from the purpose of coordinated planning.

Practice questions

01If departmental budgets do not match each other what problem is indicated?यदि विभागीय बजट आपस में मेल नहीं खाते तो किस समस्या का संकेत है?

02Why will control be difficult if targets in a budget are not measurable?बजट में लक्ष्य मापनीय न हों तो नियंत्रण क्यों कठिन होगा?

03Which is the most correct analytical statement about a budget?बजट का सबसे सही विश्लेषणात्मक कथन कौन सा है?

04Why is a budget called a basis of control?बजट को नियंत्रण का आधार क्यों कहा जाता है?

05Why is it necessary to identify the key limiting factor while preparing a budget?बजट तैयार करते समय प्रमुख सीमित घटक की पहचान क्यों जरूरी है?

06If demand is limited which budget should be prepared first?यदि मांग सीमित है तो सबसे पहले कौन सा बजट बनाना अधिक उचित होगा?

07What is a budget manual used for?बजट मैनुअल का उपयोग किसलिए किया जाता है?

08Deliberately showing higher expenses and lower income in a budget may be an example of which problem?बजट में जानबूझकर खर्च अधिक और आय कम दिखाना किस समस्या का उदाहरण हो सकता है?

09Why can performance evaluation become weak if budget targets are too easy?यदि बजट लक्ष्य बहुत आसान हैं तो प्रदर्शन मूल्यांकन क्यों कमजोर हो सकता है?

10What should be considered while selecting the budget period?बजट अवधि का चयन करते समय किस बात पर ध्यान देना चाहिए?

11What is the main benefit of a rolling budget?चल बजट या रोलिंग बजट का मुख्य लाभ क्या है?

12What is the simple meaning of incremental budgeting?अनुवृद्धि बजट पद्धति का सरल अर्थ क्या है?

13How is zero based budgeting different from incremental budgeting?शून्य आधारित बजट अनुवृद्धि बजट से कैसे अलग है?

14What problem may occur if delay in sales collection is ignored in a budget?बजट में बिक्री संग्रह की देरी को अनदेखा करने से क्या समस्या हो सकती है?

15If actual cost is lower than budget but quality has fallen how should it be viewed?यदि वास्तविक लागत बजट से कम है लेकिन गुणवत्ता गिर गई है तो इसे कैसे देखना चाहिए?

16What does setting a sales target higher than production capacity indicate in budgeting?बजट में उत्पादन से अधिक बिक्री लक्ष्य रखने से क्या संकेत मिलता है?

17For what can standard cost be used in a budget?बजट में मानक लागत का उपयोग किसलिए किया जा सकता है?

18In which situation may a department not be blamed even after an adverse variance?किस स्थिति में प्रतिकूल विचलन होते हुए भी विभाग दोषी नहीं माना जाएगा?

19Why is identifying controllable expenses useful in budgeting?बजट में नियंत्रण योग्य खर्च की पहचान क्यों उपयोगी है?

20Which budget can estimate the timing of cash receipts from debtors?किस बजट से देनदारों से नकद प्राप्ति का समय अनुमानित किया जा सकता है?

21Why are due payment dates important in a budget?बजट में देय भुगतान की तारीखें क्यों महत्वपूर्ण होती हैं?

22Why may safety stock provision be kept in a budget?बजट में सुरक्षा भंडार का प्रावधान किसलिए हो सकता है?

23What situation may arise if the material budget is prepared too low?यदि सामग्री बजट बहुत कम बनाया गया तो कौन सी स्थिति बन सकती है?

24Why is it useful to divide expenses into fixed and variable classes in a budget?बजट में खर्च को स्थायी और परिवर्ती वर्गों में बांटना क्यों उपयोगी है?

25Sales commission can be treated as which type of cost in a budget?बजट में बिक्री कमीशन किस प्रकार की लागत माना जा सकता है?

Analytics choices

01If departmental budgets do not match each other what problem is indicated?

02Why will control be difficult if targets in a budget are not measurable?

03Which is the most correct analytical statement about a budget?

04Why is a budget called a basis of control?

05Why is it necessary to identify the key limiting factor while preparing a budget?

06If demand is limited which budget should be prepared first?

07What is a budget manual used for?

08Deliberately showing higher expenses and lower income in a budget may be an example of which problem?

09Why can performance evaluation become weak if budget targets are too easy?

10What should be considered while selecting the budget period?

11What is the main benefit of a rolling budget?

12What is the simple meaning of incremental budgeting?

13How is zero based budgeting different from incremental budgeting?

14What problem may occur if delay in sales collection is ignored in a budget?

15If actual cost is lower than budget but quality has fallen how should it be viewed?

16What does setting a sales target higher than production capacity indicate in budgeting?

17For what can standard cost be used in a budget?

18In which situation may a department not be blamed even after an adverse variance?

19Why is identifying controllable expenses useful in budgeting?

20Which budget can estimate the timing of cash receipts from debtors?

21Why are due payment dates important in a budget?

22Why may safety stock provision be kept in a budget?

23What situation may arise if the material budget is prepared too low?

24Why is it useful to divide expenses into fixed and variable classes in a budget?

25Sales commission can be treated as which type of cost in a budget?