Paper 2 · June 2020 · Cash Budgeting

In budgetary control, what is meant by the principal budget factor?

AThe budget prepared before all the others by the sales team

BThe total cost shown in the master budget for the year

CThe factor that limits the organisation's activity

DThe largest single item of expenditure in a budget

Explanation

The principal budget factor, also called the limiting or key factor, is the one that restricts what the organisation can do at a given time. It has to be identified first because every other budget is built around it.

Derived from ZIMSEC Accounting 6001/2 Paper 2, June 2020, Q1

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