Chapter 21 Budgeting - Test 1

VCE ACCOUNTING
UNIT 4 – CONTROL AND ANALYSIS OF BUSINESS PERFORMANCE
CHAPTER 21 – BUDGETING
© Michael Allison, Trinity Grammar School.
Author’s permission required for external use
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Chapter 21 Test 1 – Budgeting
Name ___________________________________________
Circle the correct response for each question:
1. (a) (b) (c) (d)
2. (a) (b) (c) (d)
3. (a) (b) (c) (d)
4. (a) (b) (c) (d)
5. (a) (b) (c) (d)
6. (a) (b) (c) (d)
7. (a) (b) (c) (d)
8. (a) (b) (c) (d)
9. (a) (b) (c) (d)
10. (a) (b) (c) (d)
11. (a) (b) (c) (d)
12. (a) (b) (c) (d)
13. (a) (b) (c) (d)
14. (a) (b) (c) (d)
15. (a) (b) (c) (d)
16. (a) (b) (c) (d)
17. (a) (b) (c) (d)
18. (a) (b) (c) (d)
19. (a) (b) (c) (d)
20. (a) (b) (c) (d)
21. (a) (b) (c) (d)
22. (a) (b) (c) (d)
23. (a) (b) (c) (d)
24. (a) (b) (c) (d)
25. (a) (b) (c) (d)
Total /25 marks

VCE ACCOUNTING
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Chapter 21 Test 1 – Budgeting
A small business has supplied the following information in preparing a budget for the quarter ended
30 September 2015.
(excl. GST)
Credit sales May (Actual) 7000
June (Actual) 11000
July (Budget) 9000
August (Budget) 12000
September (Budget) 14000
Past history indicates that 70% of debtor accounts are settled in the month after the sale and 25%
pay in the second month after sale. Bad debts are estimated at around 5%.
1. The amount of cash collected from debtors in July 2015 is budgeted to be:
a) $11,000
b) $12,100
c) $9,450
d) $10,395
2. During September 2015, the amount of cash collected from debtors for sales made in July 2015
will be:
a) $6,930
b) $6,300
c) $2,475
d) $2,250
A firm purchases 90% of its inventory on credit from suppliers, with the remaining stock paid for in
cash. 80% of the goods supplied on credit are paid in full in the month after purchase, with the other
20% paid for in the second month after the purchase was made.
The following data relates to stock purchases for the last two months of the last financial year and
the budget estimates for the next two months. All amounts include 10% GST.
(incl. GST)
Stock purchases May (Actual) 6600
June (Actual) 9240
July (Budget) 8030
August (Budget) 8910

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3. The amount of cash paid to creditors in August will be:
a) $8,189
b) $7,445
c) $6,768
d) $8,272
4. The amount shown in the Budgeted Cash Flow Statement relating to these items will be:
a)
Budgeted Cash Flow Statement (Extract) for two months ending 31 August 2015
July $ August $
Cash Flows from Operating Activities
Cash purchases of stock (803) (891)
Payments to creditors (7841) (7445)
(8644) (8336)
b)
July $ August $
GST paid (73) (81)
(8644) (8336)
c)
July $ August $
GST paid (80) (89)
(8724) (8425)
d)
July $ August $
GST paid (73) (81)
(8030) (8910)

VCE ACCOUNTING
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A budget is being prepared for a small business for January 2015. The following information has
been provided.
Month
Cash sales
(excluding GST)
Credit sales
(excluding GST)
Credit purchases of
stock (including GST)
November (actual) 10,000 5,000 8,800
December (actual) 15,000 6,000 3,300
January (budgeted) 14,000 4,000 7,700
The following information applies:
 80% of debtors settle their accounts in full in the month after purchase to take advantage of
a 5% discount.
 20% of debtors settle their accounts in full in the second month after purchase.
 90% of creditors are repaid in the month after stock is purchased. A 10% discount is given
for prompt payment.
 10% of creditors are repaid two months after stock is purchased in line with the firm’s 60
day credit terms.
5. The discount expense given to debtors during January for credit sales made in December is
expected to be:
a) $330
b) $240
c) $264
d) $300
6. During January, the firm is expecting to receive discount revenue from creditors of:
a) $330
b) $297
c) $327
d) $363

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A business has provided information regarding its credit sales and credit purchases of stock below to
prepare a budget for the quarter ended 30 June 2015. These amounts do NOT include GST.
Credit sales
$
Credit purchases
$
Historical data: January 9000 4800
February 12500 7100
March 13200 5900
Projected data: April 10400 8200
May 10800 6400
June 12900 5700
Credit sales: Credit purchases:
 60% of debtors pay in the month after
the sale
 Debtors paying within this time are given
a 5% discount
 38% of debtors pay in the second month
after the sale
 2% of debtors will become bad debts
 80% of creditors are paid in the month
after purchase to take advantage of a 7%
discount
 20% of creditors have their accounts are
settled two months after purchase
7. The amount of cash collected in April from credit sales made in March will be:
a) $8,712
b) $7,986
c) $7,524
d) $8,276
8. The amount of bad debts that will be recorded from sales made in February will be:
a) $250
b) $227
c) $275
d) $110
9. During the budgeted period, the payments to creditors for purchases made in June will be:
a) $4,664
b) $4,241
c) $5,016
d) $0

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A small business is preparing a budget for the quarter ended 31 March 2015. The firm has provided
the following budgeted estimates for cash sales and collections from debtors.
Month
Budgeted cash sales
(excluding GST)
Budgeted collections
from debtors
January 15,000 7,000
February 12,000 9,000
March 18,000 5,000
The following transactions are expected during the period.
Item
Amount
(excluding GST)
Advertising 1,200
Wages 10,000
Drawings 3,000
Loan repayments 1,000
Cleaning 300
In addition, the firm’s insurance premium of $2,400 plus GST is paid in three instalments in February,
June and October each year. The owner has also decided to purchase a new vehicle during March for
$10,000 (plus $1,000 GST) and will contribute $1,500 to the business to help fund the purchase.
10. The amount of GST expected to be collected during the budgeted period is:
a) $6,600
b) $0
c) $70,500
d) $4,500
11. The amount shown for GST paid in the Operating Activities section of the Budgeted Cash Flow
Statement will be:
a) $1,230
b) $390
c) $1,390
d) $230
12. The balance of the Financing Activities section of the Budgeted Cash Flow Statement will be:
a) $2,500
b) ($2,500)
c) ($3,000)
d) $3,000

VCE ACCOUNTING
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13. If the firm’s cash balance at the beginning of the period on 1 January 2015 was $10,000, what is
the expected bank balance at the end of the budgeted period on 31 March 2015?
a) $54,470
b) $56,570
c) $55,470
d) $52,710
In preparing a Budgeted Cash Flow Statement for February 2015, a small business has prepared the
following estimates.
 Cash sales $40,000 (plus $4,000 GST)
 Collections from debtors $16,000
 Payments to creditors $25,000
 Wages $400 per week
 Advertising $1,000 (plus $100 GST)
 Cleaning $200 per fortnight (plus $20 GST)
 Office expenses $75 per week (plus $7.50 GST)
 Depreciation of shop fittings $100 per week
 Drawings $800 per week ($700 cash, $100 of stock)
 New computer $2,000 (plus $200 GST)
 Interest expenses on the firm’s loan are due on February 15 and are expected to be $1,700
 Loan repayments $150 per week.
14. The Net Cash Flows from Operating Activities are budgeted to be:
a) $29,830
b) $31,330
c) $29,630
d) $29,190
15. The Net Cash Flows from Investing Activities are budgeted to be:
a) ($2,000)
b) ($2,100)
c) ($2,400)
d) ($2,200)
16. The Net Cash Flows from Financing Activities are budgeted to be:
a) ($5,100)
b) ($3,400)
c) ($2,950)
d) ($3,800)

VCE ACCOUNTING
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17. Which of the following items would appear in a Budgeted Cash Flow Statement but not in a
Budgeted Income Statement?
a) Credit sales
b) Wages paid
c) Stock gain
d) Prepaid insurance
18. Which of the following items would appear in a Budgeted Income Statement but not in a
Budgeted Cash Flow Statement?
a) GST received
b) Cash sales
c) Discount revenue
d) Marketing expenses paid
19. Which of the following items would appear both in a Budgeted Cash Flow Statement and a
a) Cash sales
b) Bad debts
c) Discounts given to debtors for prompt payment
d) Capital contributions by the owner
20. Which of the following items would not appear in neither a Budgeted Cash Flow Statement nor
a Budgeted Income Statement?
a) Discounts received from creditors
b) Stock write down
c) Drawings of stock by the owner
d) Sale of non-current assets for cash
21. Which of the following items would appear in a Budgeted Cash Flow Statement but not in a
a) Discounts expense
b) Depreciation
c) Payments to creditors
d) Accrued revenue

VCE ACCOUNTING
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On 1 April 2015, a small business had debtors of $9,000. During March 2015, total credit sales were
$7,000 plus $700 GST. The sales for April are expected to be 15% higher than in March. Discounts of
$275 will be given to debtors during April, while bad debts of $350 are expected. Debtors on 30 April
2015 are budgeted to be $8,400.
22. The amount of cash collected from debtors during April 2015 is expected to be:
a) $8,830
b) $7,675
c) $8,025
d) $9,180
In preparing a budget for May 2015, a business has provided the following information:
 The balance of debtors on 1 May is $8,000 and the owner expects the closing balance on 31
May to be $5,700.
 Total sales for May are budgeted to be $13,700 (plus 10% GST). Analysis of past sales data
shows that cash sales represent 70% of total sales.
 Bad debts for May are expected to be 2% of credit sales for May.
 Fast paying debtors are given a discount for prompt payment. It is estimated that discounts
for May will be 5% of May’s credit sales.
 Sales returns are expected to be no more than 1% of credit sales for May.
23. The Debtors Control ledger must be re-created to determine the amount of cash collected from
debtors expected during May 2015. The correct ledger is:
a)
Debtors Control
1 May Balance 8000 31 May Bank 16164
31 May Credit sales/GST clearing 15070 31 May Sales returns 151
31 May Bad debts 300
31 May Discount expense 754
31 May Balance 5700
23070 23070
1 Jun Balance 5700
b)
Debtors Control
31 May Bad debts 82
31 May Balance 5700
12521 12521
1 Jun Balance 5700

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c)
Debtors Control
31 May Bad debts 192
31 May Balance 5700
18549 18549
1 Jun Balance 5700
d)
Debtors Control
31 May Bad debts 90
31 May Balance 5700
12521 12521
1 Jun Balance 5700
In preparing a budget for August 2015, a firm has provided the following information from the
Balance Sheet as at 31 July 2015:
Balance of stock control $40,600
Balance of creditors control $5,200
During August, the owner estimates that sales will be $90,000 plus $9,000 GST. Credit sales
traditionally make up 70% of total sales and a 100% sales mark-up is applied to the cost of stock. By
the end of August, the following balances are expected:
Balance of stock control $48,100
Balance of creditors control $6,500
24. The amount of credit purchases of stock expected during August is:
a) $47,727
b) $52,500
c) $57,750
d) $39,000

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25. The Creditors Control ledger must be re-created to prepare the budget for August 2015. The
correct ledger is:
a)
Creditors Control
31 Aug Bank 51200 1 Aug Balance 5200
31 Aug Balance 6500 31 Aug Stock control/GST clearing 52500
57700 57700
1 Sep Balance 6500
b)
Creditors Control
31 Aug Balance 6500 31 Aug Stock control/GST clearing 57750
62950 62950
1 Sep Balance 6500
c)
Creditors Control
31 Aug Balance 6500 31 Aug Stock control 57750
62950 62950
1 Sep Balance 6500
d)
Creditors Control
31 Aug Stock control/GST clearing 57750 1 Aug Balance 5200
31 Aug Balance 6500 31 Aug Bank 56450
64250 64250
1 Sep Balance 6500

Chapter 21 Budgeting - Test 1

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Chapter 21 Budgeting - Test 1