Final answer:
The primary purpose of a cash budget is to manage and control cash flows, ensuring sufficient cash for obligations and informed decision-making, not just to determine cash for the balance sheet.
Step-by-step explanation:
I disagree with the statement that the primary reason for preparing a cash budget is to determine the amount of cash to include on the budgeted balance sheet. While it is true that a cash budget will impact the balance sheet, the main purpose of creating a cash budget is to plan and control the cash flows into and out of a business or entity. It helps in ensuring that sufficient cash is available to meet the entity's obligations, such as operating expenses and debt payments, and to avoid unnecessary cash shortages or surpluses.
A cash budget also aids in making informed decisions regarding future investments, savings, and financing needs. It enables entities to foresee periods of tight liquidity or excess cash, which can then be managed through investment or borrowing strategies. Thus, the overarching goal of a cash budget is to help maintain a balance between the entity's cash inflows and outflows, enabling it to operate smoothly and achieve its financial goals and objectives.