Budgeting Concepts 

الترجمة :Translation

Advantage                                                   ميزة – فائدة 
Attaining                                            تحقيق – وصول  – بلوغ 
Board of director (BOD)                        أعضاء مجلس الادارة 
Budget                                                         الموازنة 
Charting                                                     رسم خريطة  
Communication                                          تواصل – اتصال 
Control tool                                                أداة للرقابة 
Coordination                                                 تنسيق 
Ensure                                                     ضمان – تاكيد 
Motivation tool                                          أداة للتحفيز 
Operational Plan                                       خطة تشغيلية 
Owners                                                         الملاك 
Path                                                مسار – طريق – سبيل 
Planning                                                       التخطيط 
Qualitative                                                      نوعى 
Quantitative                                                    كمي 
Realistic                                                  واقعى – حقيقي 
Shareholders                                               المساهمين 
Strategy                                                      استراتيجية 
Strengths                                                     نقاط القوة 
Weaknesses                                                نقاط الضعف 
Wealth                                                           ثروة 

 التدريب على الدرس :Practice Lesson

Question: 1

All of the following are advantages of the use of budgets in a management control system except that budgets

A. Force management planning.

B. Provide performance criteria.

C. Promote communication and coordination within the organization.

D. Limit unauthorized expenditures.

• advantages  مميزات 
• Force  يجبر – يفرض 
• criteria معيار 
• Promote يعزز 

Question: 2

A budget helps a company control costs by setting cost guidelines. However, a budget also performs the function(s) of

A. Planning.

B. Motivating.

C. Communicating.

D. All of the answers are correct.

• guidelines   توجيهات – قواعد ارشادية 
• performs تؤدى – تقوم 
• function  وظيفة 

Question: 3

Ineffective budget control systems are characterized by

A. Use of budgets as a planning but not a control tool.

B. Use of budgets for harassment of individuals rather than motivation.

C. Lack of timely feedback in the use of the budget.

D. All of the answers are correct.

• Ineffective   غير فعال 
• harassment  مضايقة – ازعاج 

Question: 4

Which of the following statements regarding budgets is false?

A. Budgets present organizational plans in a formal, logical, and integrated manner.

B. Budgets are used only as a planning function.

C. Budgets may be developed for cash flows or labor usage.

D. A budget is a plan that contains a quantitative statement of expected results.

• false        خطأ 
• expected    متوقع – متوقعة 

Question: 5

The major objectives of any budget system are to

A. Define responsibility centers, provide a framework for performance evaluation, and promote communication and coordination among organization segments.

B. Define responsibility centers, facilitate the fixing of blame for missed budget predictions, and ensure goal congruence between superiors and subordinates.

C. Foster the planning of operations, provide a framework for performance evaluation, and promote communication and coordination among organization segments.

D. Foster the planning of operations, facilitate the fixing of blame for missed budget predictions, and ensure goal congruence between superiors and subordinates.

Question: 6

An improperly executed budget process might have the effect(s) of

A. Disregard of overall company goals.

B. Inflated budget requests.

C. Meeting short-term but not long-term goals.

D. All of the answers are correct.

Question: 7

All of the following are criticisms of the traditional budgeting process except that it

A. Makes across-the-board cuts when early budget iterations show that planned expenses are too high.

B. Incorporates non-financial measures as well as financial measures into its output.

C. Overemphasizes a fixed time horizon, such as one year.

D. Is not used until the end of the budget period to evaluate performance.

Question: 8

The best explanation of how the efficient allocation of organizational resources is planned during the budgeting process is that a budget

A. Demonstrates how important it is to have additional spare resources on hand in case the actual results vary from the budget.

B. Demonstrates how a company can pull resources from bottlenecks to apply them to other areas to attain goals.

C. Identifies the resources and commitments required to fulfill the organization’s goals for the period identified.

D. Is a process for evaluating projects needed and related external financing required to meet resource requirements.

Question: 9

Which one of the following is not a characteristic of a successful budget process?

A. Setting specific expectations to compare to actual results.

B. Gaining top management’s support.

C. Using market feedback to assist in setting expectations.

D. Implementing the budget as the only benchmark for performance evaluation.

Question: 10

Which one of the following best describes a reason why a company’s budgeting should be based on the company’s strategic plans?

A. Helps control costs so that products can be sold profitably.

B. Identifies resources needed to reach strategic goals.

C. Identifies the external factors that have changed from the prior year and those that remain the same.

D. Establishes standards to measure employee performance.

   إجابة التدريب على الدرس :Practice Explanation

Q 1 – Answer (D) is correct.

Budgets serve many roles. They force management to plan ahead, communicate organizational goals throughout the organization, and provide criteria for future performance evaluations.

Q 2 – Answer (D) is correct.

A budget is a realistic plan for the future expressed in quantitative terms. It is a planning tool that establishes goals and permits a company to anticipate problems and to plan for decisions. A budget can be a motivator, especially if it sets reasonable standards, has some flexibility, and was prepared with the participation of those affected. A budget is a communication tool because it informs employees about the goals the company is striving to attain and thus enhances goal congruence. A budget is also a means of coordinating the company’s various activities. The company’s overall budget consists of many smaller budgets.

Q 3 – Answer (D) is correct.

Ineffective budget control systems are characterized by each of the items noted. The use of budgets for planning only is a problem that must be resolved through the education process. Management must be educated to use the budget documents for control, not just planning. Management must learn that budgets can motivate and help individuals achieve professional growth as well as the goals of the firm. Ignoring budgets obviously contributes to the ineffectiveness of the budget system. Finally, feedback must be timely or lower management and employees will soon recognize that budget feedback is so late it provides no information, making the budget a worthless device.

Q 4 – Answer (B) is correct.

Budget formulation is a planning function; however, budgets are also useful control devices. Budgets provide a basis for control of performance through comparisons of actual with budgeted data. They permit analysis of variations from plans and signal the need for corrective managerial action.

Q 5 – Answer (C) is correct.

A budget is a realistic plan for the future expressed in quantitative terms. The process of budgeting forces a company to establish goals, determine the resources necessary to achieve those goals, and anticipate future difficulties in their achievement. A budget is also a control tool because it establishes standards and facilitates comparison of actual and budgeted performance. Because a budget establishes standards and accountability, it motivates good performance by highlighting the work of effective managers. Moreover, the nature of the budgeting process fosters communication of goals to company subunits and coordination of their efforts. Budgeting activities by entities within the company must be coordinated because they are interdependent. Thus, the sales budget is a necessary input to the formulation of the production budget. In turn, production requirements must be known before purchases and expense budgets can be developed, and all other budgets must be completed before preparation of the cash budget.

Q 6 – Answer (D) is correct.

Lack of goal congruence can result when attaining a subunit’s budgetary goal results in disregard of overall company goals. Subunit managers may inflate their budget requests to provide operating leeway and then engage in unnecessary spending to avoid future budget cuts. A budget may encourage exclusive concentration on meeting short-term standards at the expense of long-term considerations. A manager fearful of not meeting the budget targets may improperly manipulate allocation of expenses. The manager seeking to stay within the budget may disregard employee morale and poor working conditions. Inter unit resentment may develop as a result of competition for scarce funds.

Q 7 – Answer (B) is correct.

Traditional budgeting focuses strictly on financial measures.

Q 8 – Answer (C) is correct.

A budget lays out in specific terms an organization’s expectations about the consumption of resources and the resulting outcomes. Therefore, it identifies the resources and commitments required to fulfill the organization’s goals for the period identified.

Q 9 – Answer (D) is correct.

Implementing the budget as the only benchmark for performance evaluation is not a characteristic of a successful budget process. Decisions about a firm’s strategy, and in turn about its budget, are dependent upon general economic conditions and their expected trends as well as the availability of financial resources. Industry information is also a crucial aspect of benchmarking performance.

Q 10 – Answer (B) is correct.

The strategic plan is the basis for everything else a company does. The budget identifies the resources needed to achieve strategic goals.