Which of the following are reasons to generate a pro forma cash budget on a monthly basis?
A)An income statement indicates a profit but the budget may indicate a loss.
B)Sales are recognized as income when the sale is made.
C)A business can monitor the actual cash on hand.
D)All of the above.

Question

Quizplus · Accepted Answer

A pro forma cash budget is necessary to monitor actual cash on hand and to predict future cash inflows and outflows. An income statement may show a profit, but actual cash flow may be negative due to timing differences in when expenses and revenues are recognized. Sales being recognized as income when the sale is made is an accounting principle and not a specific reason for generating a pro forma cash budget, but it is still important to consider when creating the budget. Therefore, all options are valid reasons for generating a pro forma cash budget on a monthly basis.

Which of the Following Are Reasons to Generate a Pro