Prepare for FAA 2026 with these Important MCQs on Budgetary Control, specially prepared by Exam Waves. Practice key questions on different types of budgets, budgetary control, budgeting techniques, and other important concepts for better exam preparation.
Q1. Consider the following statements regarding Budget:
- The term “Budget” is derived from the French word “Bougette”, which means bag.
- A Budget is an accounting plan.
- Budgeting is a management device used for short-term planning and control.
- A Budget is a formal plan expressed in monetary terms.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q2. Consider the following statements regarding Budgetary Control and its objectives:
- Budgetary Control is a method of managing costs through the preparation of budgets.
- Budgeting forms a part of Budgetary Control.
- Planning and coordination are objectives of Budgetary Control.
- Measurement, communication and control are also included among its objectives.
Which of the statements given above are correct?
A) 1, 2 and 3 only
B) 1, 3 and 4 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q3. Consider the following statements regarding Sales Budget:
- It forecasts the total sales expected during the budget period.
- Sales may be expressed in quantity or monetary terms.
- It is used as the first step in preparing other budgets.
- It is prepared by the Sales Manager.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q4. Consider the following statements regarding Production Budget and Material Budget:
- Production Budget represents the estimate of the quantity of production for the budget period.
- Production Budget is based on the Sales Budget.
- Material Budget includes quantities of direct materials required.
- Material Budget helps in preparing the Purchase Budget.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q5. Consider the following statements regarding Cash Budget:
- Cash Budget is prepared at the end of the budgeting process.
- It is a detailed projection of cash receipts and cash payments.
- It shows cash inflow and cash outflow during the budget period.
- It helps management in determining future liquidity requirements of the firm.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q6. Consider the following types of budgets:
- Personal Budget
- Administration Budget
- Selling and Distribution Budget
- Capital Expenditure Budget
Which of the above are included among the budgets given under the budgeting process?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q7. Consider the following statements regarding Master Budget:
- It is an integrated budget.
- It reflects the estimated Profit and Loss.
- It reflects the estimated financial position.
- It represents only the estimated cash receipts and cash payments of a business.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: B
Q8. Consider the following statements regarding Zero-Based Budgeting:
- Zero-Based Budgeting was first introduced in India in 1986 in the Indian cost control system.
- It was developed in the USA by Peter Phyr in 1970.
- It starts with the assumption that the budget for the next period is zero.
- Demand for a function is not justified for a single purpose.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: B
Q9. Consider the following features of Zero-Based Budgeting:
- The budget for the next period starts from zero.
- The demand for a function is justified for a single purpose.
- It suggests that businesses should not only make decisions about proposed new programs.
- Businesses should also review the suitability of existing programs.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q10. Consider the following statements regarding Performance Budget:
- It begins with a plan.
- It draws up goals and objectives for the year.
- Resources are allocated on the basis of planned budget and cost-benefit analysis.
- Its aim is to improve the effectiveness and efficiency of public expenditure.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q11. Consider the following statements regarding Performance Budget:
- It links the funding of public sector organizations to the results they deliver.
- It uses indicators, evaluation and program costing to measure performance.
- It allocates resources on the basis of planned budget and cost-benefit analysis.
- It is concerned only with recording past expenditure and does not consider performance.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: B
Q12. Consider the following statements regarding Fixed Budget and Flexible Budget:
- A Fixed Budget is prepared for one level of output and one set of conditions.
- A Fixed Budget assumes no change in the budget level of activity.
- A Fixed Budget remains unchanged with the volume of output.
- A Flexible Budget is designed to change with the level of activity.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q13. Consider the following statements regarding budgets classified according to their time period:
- A Long-term Budget covers more than one year, generally 1–5 years.
- A Short-term Budget covers up to one year.
- A Current Budget may be prepared for a month or week.
- A Current Budget must necessarily cover a period of more than one year.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: B
Q14. Consider the following statements regarding the techniques of Budgetary Control:
- Plan and target are included in the techniques of Budgetary Control.
- Recording actual performance is included in Budgetary Control.
- Continuous comparison is one of its techniques.
- Variance analysis is also used as a technique of Budgetary Control.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q15. Consider the following statements regarding different types of budgets and Budgetary Control:
- Sales Budget forecasts expected sales and is used as the first step in preparing other budgets.
- Production Budget is based on the Sales Budget.
- Cash Budget shows estimated cash inflows and outflows during the budget period.
- Flexible Budget is designed to change according to the level of activity.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
