Budget and Budgetary Control MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Budget and Budgetary Control, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Budget and Budgetary Control MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Budget and Budgetary Control mcq questions that explore various aspects of Budget and Budgetary Control problems. Each MCQ is crafted to challenge your understanding of Budget and Budgetary Control principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Budget and Budgetary Control MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

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Budget and Budgetary Control MCQs | Page 3 of 6

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Q21.
What is a challenge in the preparation of budgets?

a.

Individual perception is always considered

b.

Holistic and time-tested measures are always adopted

c.

Adequacy of budget control is guaranteed

d.

Budgets sometimes take care of individual perception

Discuss
Answer: (d).Budgets sometimes take care of individual perception Explanation:The preparation of budgets sometimes takes care of individual perception, and unless it is framed on holistic and time-tested measures, its objectives will not be served.
Q22.
Why is the implementation of the budgetary control system limited in small concerns?

a.

It is a routine and customary affair

b.

It is not supported by personal administration

c.

It is very expensive

d.

It places restrictions on the authority of dynamic executives

Discuss
Answer: (c).It is very expensive Explanation:The budgetary control system is generally implemented in large organizations and is hardly followed in small concerns because it is very expensive.
Q23.
What is the role of the organization chart in the implementation of a sound system of budgetary control?

a.

It provides flexibility to the system

b.

It defines roles, responsibilities, and duties for each level of executives

c.

It encourages rigidity in the system

d.

It restricts the delegation of authority

Discuss
Answer: (b).It defines roles, responsibilities, and duties for each level of executives Explanation:There must be a well-defined organization chart laying out the roles, responsibilities, and duties for each level of executives.
Q24.
Why is participation important in the implementation of the budgetary control system?

a.

To limit the involvement of people

b.

To avoid drawing up a budget

c.

To involve as many people as possible in drawing up a budget and for its successful implementation

d.

To discourage the successful implementation of the system

Discuss
Answer: (c).To involve as many people as possible in drawing up a budget and for its successful implementation Explanation:The budgetary control system needs to involve as many people as possible in drawing up a budget and for its successful implementation.
Q25.
What does the comprehensiveness of the budgetary control system involve?

a.

Limiting the scope to certain departments

b.

Embracing the whole organization and all its activities

c.

Ignoring the definition of objectives, roles, and responsibilities

d.

Avoiding clear-cut terms

Discuss
Answer: (b).Embracing the whole organization and all its activities Explanation:The budgetary control system shall embrace the whole of the organization and all its activities.
Q26.
Why is flexibility essential in a sound system of budgetary control?

a.

To avoid revision of targets

b.

To encourage rigidity

c.

To adapt to changing circumstances by allowing the revision of targets after periodic review

d.

To limit the comparison of actual performance with standards

Discuss
Answer: (c).To adapt to changing circumstances by allowing the revision of targets after periodic review Explanation:A sound system of budgetary control should not be rigid but rather dynamic, allowing revision of targets after periodic review to adapt to changing circumstances.
Q27.
What is the first step in the budgetary control system in insurance business?

a.

Setting annual targets of ICR

b.

Periodical review of performance

c.

Setting KPA s (key performance areas)

d.

Preparation of budget

Discuss
Answer: (d).Preparation of budget Explanation:The first step for budgetary control is the preparation of the budget, which is a formal statement showing the allocation of financial resources for different products, plans, processes, projects, or activities.
Q28.
How are annual budgets/targets set for various departments in insurance business?

a.

Only for the entire company as a whole

b.

Only for important budget centers

c.

For each and every department

d.

Only for traditional products

Discuss
Answer: (c).For each and every department Explanation:Annual budgets/targets of business collection are set for each and every department in insurance business.
Q29.
What is the significance of setting annual budgets/targets of ICR (Incurred Claim Ratio) in insurance business?

a.

To avoid financial allocation for different products

b.

To determine claim settlement ratios

c.

To set KPA s for budget center in-charges

d.

To closely monitor claim-related expenses

Discuss
Answer: (d).To closely monitor claim-related expenses Explanation:One of the components of the budgetary control system is setting annual budgets/targets of ICR (Incurred Claim Ratio) to closely monitor claim-related expenses.
Q30.
What is the purpose of setting annual budgets/targets of distribution expenses in insurance business?

a.

To avoid budgeted expenditure

b.

To set combined ratios

c.

To closely monitor commission and brokerage expenses

d.

To ignore budget center performance

Discuss
Answer: (c).To closely monitor commission and brokerage expenses Explanation:One of the components of the budgetary control system is setting annual budgets/targets of distribution expenses, which includes commission and brokerage.
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