Question

Which of the following is not true of cash budget?

• A. Cash budget indicates timings of short-term borrowing
• B. Cash budget is based on accrual concept
• C. Cash budget is based on cash flow concept
• D. Repayment of principal amount of law is shown in cash budget

Answer 1

The correct option is B Cash budget is based on accrual concept

Cash budget is prepared to identify the expected cash receipts and cash payments for given a period. This includes all item of receipts and payment i.e. revenue and capital both.

Cash budget is based on the cash concept, hence all the cash receipts and payments are considered irrespective of the period. Cash budget does not have any linkage with accrual concept.