Question

The budgeted income statement________.

A) reports cash paid for purchases of direct materials
B) includes amounts from the sales, cost of goods sold, cash, and capital expenditures budgets
C) is accrual-based
D) does not include depreciation expense

Answer 1

The budgeted income statement is accrual-based and includes projected figures for sales, cost of goods sold, and non-cash expenses such as depreciation.

Step-by-step explanation:

The budgeted income statement is a financial statement that projects the income and expenses for a company over a specific period in the future, typically one year. Specifically, the correct answer to the given question is option C) it is accrual-based. This means that it includes revenues when they are earned and expenses when they are incurred, rather than when the cash is actually received or paid out.

Unlike a cash flow statement, the budgeted income statement includes non-cash expenses such as depreciation and also includes projected sales, cost of goods sold, operating expenses, and other income statement accounts that might derive from various components of the master budget like the sales or operating expense budgets. It does not report cash paid for purchases of direct materials (eliminated as a choice A) or includes cash or capital expenditures budgets (eliminated as a choice B), nor does it exclude depreciation expense (eliminated as a choice D).