Question

Which of the following statements is false in regards to budgets?

A. Budgets must measure a year in length.
B. Budgets based on research and analysis are more likely to result in realistic goals.
C. Effective budgeting depends on a sound organizational structure.
D. Past performance is often the starting point from which future budget goals can be formulated.

Answer 1

Answer:

A. Budgets must measure a year in length

Explanation:

Budget periods are based on organisation goals or targets for a period of time. Budgets, which are estimates of income and expenses, can be prepared for a specified period of time e.g a year, a month, a week, five years etc. This makes option A incorrect.

In order to set realistic budgets, adequate research and review of past performance is required to set attainable goals for the organisation. Furthermore, for budgets to be effective, a sound organizational structure that clearly demarcates roles and responsibilities should be in place in order to meet the set goals. Therefore options B, C and D are correct.