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CMA Intermediate · Financial Management and Business Data Analytics · Management of Cash and Cash Equivalents

Which of the following items is excluded when preparing a cash budget for a manufacturing company?

Depreciation is excluded from a cash budget because it is a non-cash expense that involves no movement of cash. Advance tax payments, cash purchases and dividend receipts all change the cash balance, so they must be included in the budget.

  1. ADepreciation on plant and machineryCorrect
  2. BPayment of advance tax instalment
  3. CCash purchase of raw materials
  4. DReceipt of dividend from investments

Explanation

A cash budget records only actual cash inflows and outflows. Depreciation is a non-cash charge, so it is excluded. Advance tax, cash purchases and dividend receipts all involve cash movement and are included.

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