CAF-7 · Chapter 11 · Question 3 of 15
A manufacturing firm is preparing its cash budget for the next quarter. Which of the following items must be explicitly EXCLUDED from the cash budget?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The annual depreciation charge on factory machinery
Explanation
A cash budget only records actual cash inflows and outflows. Depreciation is an accounting allocation of cost and represents a non-cash expense; therefore, it must never be included in a cash budget.
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