A cash budget is based on the cash method of accounting, meaning that cash receipts and cash disbursements are recorded in the forecast only when ________ is expected to take place.

Question

Quizplus · Accepted Answer

A cash budget only records cash transactions, so cash receipts and disbursements are only recorded when the cash transaction is expected to take place. This means that option C is the correct choice. Option A is incorrect because predicting a transaction is not enough for it to be recorded in a cash budget; it must be a cash transaction. Option B is incorrect because a credit sale does not involve cash, which is what a cash budget tracks. Option D is also incorrect because projections alone do not determine when a transaction will occur; it is the expectation of a cash transaction that determines when it is recorded in a cash budget.

A Cash Budget Is Based on the Cash Method of Accounting