Question

1. Regardless of the size of the organization, creating a budget consists of several distinct steps involving different functions or departments of the organization. Which of the following is NOT one of the typical steps in the budgeting process?

	A.	Preparation of the Sales or Revenue budget usually completed by Sales and Marketing.
	B.	Based on the Sales or Revenue budget, preparation of the Production budget usually completed by Operations.
	C.	Based on the Sales or Revenue and Production budgets, Accounting/Finance prepares the General and Administrative Budget.
	D.	Based on all of the foregoing budgets Operations and Accounting/Finance prepare the Capital Budget.
	E.	The Tax Department prepares a Pro-Forma tax return for the next fiscal year.
	F.	Accounting/Finance prepare the Cash Flow Budget.

Answer 1

Answer is E

Preparation of Proforma tax return is not one of the typical steps in the budgeting process. The budgeting process usually starts with sales and then based on sales, operations budget is prepared like production budget, inventory budget, material purchases, manufacturing overheads budget. Finance/ Accounting department usually prepare the general and administrative expense budget and capex budget along with operations team. Finance team also prepares the cash budget to understand the cash requirements in operations. The process ends with preparing master budget which includes Income statement, Balance sheet and Cash flow statement. So pro-forma tax return is not part of budgeting process.