Question

The Capital Expenditures Budget only impacts the Cash Budget.

Select one:

True

False

Answer 1

Answer is False

Explanation:

The capital expenditure budget is the budget for capital expenditure like buildings, furniture, machinery, equipment. It is a cash outflow for the firm. It is part of cash disbursements in cash budget. The capital expenditure has depreciation expense associated with it based on the useful life of the asset. The depreciation expense is cost of asset minus salvage value divided by useful life of the asset. The depreciation expense is a non cash expense and changed to the income statement as operating expenses. Hence capital budget has dual affect one on the cash budget and another on the operating expenses budget.