Question

Which of the following statements concerning the cash budget is CORRECT? a. Depreciation expense is not explicitly included, but depreciation's effects are reflected in the estimated tax payments. b. Cash budgets do not include financial items such as interest and dividend payments. c. Capital budgeting decisions have no effect on the cash budget until projects go into operation and start producing revenues. d. Changes that affect the DSO do not affect the cash budget. e. Cash budgets do not include cash inflows from long-term sources such as the issuance of bonds.

Answer 1

Answer:

a. Depreciation expense is not explicitly included, but depreciation's effects are reflected in the estimated tax payments.

Explanation:

The cash budget is the budget that represents the receipts and payment of transactions held in cash

It includes the interest and dividend payment as it shows the outflow of cash if payment is made in cash

Moreover, it also affects the DSO and includes cash inflows with related to the long term sources such as issuance of bonds

But as we know that the depreciation is a non cash expense so it not much included but its effects are projected in the payment of tax