Question

Which of the following statements is incorrect?

a) The cash budget is like the balance sheet, and therefore we should include gross profits and depreciation in the cash budget when they are expected to occur.
b) Because of its emphasis on cash income and expenditures, the cash budget is particularly useful for planning short-term borrowing and the timing of expenditures.
c) All the answers are correct except one.
d) Ending Cash Balance is equal to Beginning Cash Balance plus Total Collections minus Total Disbursements plus Current Borrowing.
e) Concatenation is the process of joining two or more text strings into one and Excel has a built-in function to perform this task as = CONCATENATE(TEXT 1, TEXT 2,…)

Answer 1

The incorrect statement is that the cash budget should include gross profits and depreciation. Cash budgets focus on cash flows, not profits or non-cash expenses like depreciation. They're used for planning short-term borrowing and expenditures, while balance sheets depict assets, liabilities, and capital at a specific point in time.

Step-by-step explanation:

The incorrect statement among the options provided is: a) The cash budget is like the balance sheet, and therefore we should include gross profits and depreciation in the cash budget when they are expected to occur. This statement is not correct because the cash budget is focused on cash flows, not profits or non-cash expenses such as depreciation. Instead, the cash budget reflects expected cash receipts and cash disbursements over a period of time, which helps in planning for short-term borrowing and the timing of expenditures.

On the contrary, a balance sheet is a statement of the assets, liabilities, and capital of a business at a particular point in time. Gross profit is an income statement figure that reflects revenues minus the cost of goods sold, while depreciation is a non-cash expense that reduces the value of assets over time on the income statement and is not typically included in a cash budget. The ending cash balance in a cash budget is indeed determined by the formula described in option d)Regarding option e), it is accurate that Excel provides a function for the concatenation of text strings, which can be used in various business and technology applications.AThe cash budget is like the balance sheet, but we don't include gross profits and depreciation in the cash budget. The cash budget focuses on cash income and expenditures, so it does not consider non-cash items like gross profits and depreciation. Including non-cash items in the cash budget would inaccurately reflect the cash flow. Therefore, statement a) is incorrect.Keywords: cash budget, balance sheet, gross profits, depreciation, cash income, cash expenditures, cash flow