Which of the following items would be included in a cash budget?

Question

BlackTom AI · Accepted Answer

A cash budget records actual cash receipts and cash payments for a period, so any item involving an actual cash inflow or outflow during the budget period is included.

1. Relevant knowledge points and concepts
- A cash budget forecasts cash inflows (e.g., cash sales, collections from receivables) and cash outflows (e.g., cash purchases, operating payments, capital expenditures paid in cash, loan repayments, dividends paid).
- Non-cash items (e.g., depreciation, provisions) appear in the profit & loss account or balance sheet adjustments but do not directly affect cash and therefore are excluded from the cash budget.
- Equity transactions that do not involve cash receipts or payments during the period are also excluded.

2. Step-by-step reasoning
- Start from the definition: include items that change the cash balance.
- Examine each option for whether it causes a cash movement:
  a) Bonus share issue — this is a capitalization of reserves into share capital; no cash is received or paid by the company.
  b) Depreciation on machinery — an accounting expense reflecting allocation of an asset’s cost; it decreases profit but is a non-cash charge.
  c) Doubtful debts — usually a provision (allowance) for potential bad debts and is a non-cash accounting adjustment; only an actual write-off reduces cash if recoveries or write-offs occur.
  d) Purchase of machinery for cash — this is a capital expenditure paid in cash; it is a direct cash outflow and must be included.

3. Calculations / intermediate steps
- Cash budget basic equation: Closing cash = Opening cash + Cash receipts − Cash payments ± Financing.
- The purchase of machinery for cash would appear under Cash payments, reducing the closing cash by the exact amount paid.

4. Why the correct answer is correct
- “Purchase of machinery for cash” is an actual cash payment and therefore directly affects the cash balance in the period. The cash budget must include it.

5. Why other options are incorrect
- Bonus share issue: non-cash equity reclassification.
- Depreciation: non-cash accounting expense.
- Doubtful debts: typically a non-cash provision; only actual write-offs or recoveries affect cash.

6. Conclusion
Therefore the correct item to include in a cash budget is “Purchase of machinery for cash,” which matches the provided answer.

Which of the following items would be included in a cash budget?单项选择题

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