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) Cash budgets do not include cash inflows from long-term sources such as the issuance of bonds.
D) Changes that affect the DSO do not affect the cash budget.

Question

Quizplus · Accepted Answer

Depreciation expense is not explicitly included in the cash budget, but the effects of depreciation are reflected in the estimated tax payments. Depreciation reduces taxable income, which in turn reduces the amount of taxes owed. As a result, the estimated tax payments in the cash budget will be lower due to the effects of depreciation. The other options are incorrect. Financial items such as interest and dividend payments would be included in the cash budget, as would cash inflows from long-term sources such as the issuance of bonds. Changes that affect the DSO (Days Sales Outstanding) would have an impact on the cash budget, as they would affect the timing and amount of cash inflows.

Which of the Following Statements Concerning the Cash Budget Is