The process of planning future business actions and expressing them as a formal plan is called: Multiple Choice O Budgeting. O Cost accounting. Managerial accounting. Standard cost analysis. Variance analysis.
Answer: Option-(a): Budgeting Explanation: Budget refers to planning in advance for various components of business activities such as production costs like materials, labor, overhead, etc., administrative expenses, cash, etc. based on management’s past experience and analytical skills acquired by analyzing current market conditions and customer preferences. It is prepared at the beginning of budgeting period and used as an effective control tool for variance analysis at the end of budgeting period by comparing actual result with the budgets. It cannot be used for external reporting purpose. So, option-(a) is the correct answer. For example, cash budget refers to a budget for cash receipts and spends prepared at the beginning of budgeting period on expected inflows and outflows of cash for the budgeting period. As a result, it is clear that the cash budget concentrates on cash flows only but doesn’t concentrate on non-cash revenues and expenditures. Option-(b) is incorrect because cost accounting refers to accounting costs associated with production process during the reporting period properly both in terms of units and value. It is purely based on actual activities and it is not prepared at the beginning itself. Results of this accounting are used for external reporting purpose also. Option-(c) is incorrect because managerial accounting refers to accounting management related activities and results of this accounting is mainly aiming at serving management needs and outputs cannot be used for external reporting at all. Option-(d) and (e) are incorrect because standard cost analysis and variance analysis are subsequent events carried out at the end of the period by comparing actual results with budgeted figures for various evaluation purpose.