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ACCA Applied Knowledge · Management Accounting · Nature and purpose of budgeting

A company's budget committee is reviewing the budget process. Which of the following is the most accurate statement about the role of the budget committee?

The budget committee coordinates the preparation of budgets and resolves conflicts between departments. It issues guidelines, reviews departmental budgets for consistency with the overall plan and approves them, rather than preparing them in isolation or only dealing with cash.

  1. AIt coordinates the preparation of budgets and resolves conflicts between departmental budgetsCorrect
  2. BIt prepares each departmental budget in isolation without involving managers
  3. CIt approves actual results after the period ends and sets variances
  4. DIt is responsible only for the cash budget

Explanation

The budget committee coordinates budget preparation, sets guidelines, resolves disputes between departments and reviews and approves budgets. It does not work in isolation from managers, and its role is wider than the cash budget or post-period variance approval.

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