Question

Which of the following items should a company explicitly include in its monthly cash budget?

A. Its monthly depreciation expense.
B. Its cash proceeds from selling one of its divisions.
C. Interest paid on its bank loans
D. Statements b and c are correct
E. All of the statements above are correct.

Answer 1

The correct option is D

Step-by-step explanation:

Monthly depreciation expense is not an actual cash outflow, it is simply an apportionment of cost already incurred over relevant periods,hence does not impact current cash flow .

Cash proceeds from selling division and interest paid on bank loans are relevant since the former is a cash inflow in the month and the latter is a cash outflow.

Option E is wrong as all statement are not correct ,judging from the fact that option A is wrong.

Answer 2

The correct answer is B. Its cash proceeds from selling one of its divisions.

Step-by-step explanation:

This movement is important, since it is required to know the possible source of the resources at a finished moment, but also to determine which part of the budget corresponds to the normal activity of the company and which comes from other operations. As a division sale is an important movement, if it is not recognized outside this calculation, it may cause a false interpretation of the figures.