Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Useful Information

Financial Accounting

1. Introduction to Accounting

Useful Information

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Multiple Choice

Why might managers intentionally build slack into the budget?

To comply with external financial reporting standards

To make it easier to achieve budget targets and appear to perform better

To increase the accuracy of financial forecasts

To reduce the amount of required working capital

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Verified step by step guidance

Understand the concept of budget slack: Budget slack occurs when managers intentionally overestimate expenses or underestimate revenues in a budget to make it easier to achieve targets.

Analyze the motivations behind building slack into the budget: Managers may do this to ensure they meet performance goals, which can make them appear more successful in their roles.

Evaluate the options provided in the problem: Consider each option and determine whether it aligns with the concept of budget slack. For example, 'To comply with external financial reporting standards' does not align with the purpose of budget slack, as it is unrelated to performance targets.

Focus on the correct reasoning: The correct answer is 'To make it easier to achieve budget targets and appear to perform better,' as this directly ties to the purpose of budget slack.

Conclude by understanding the implications: Building slack into the budget can lead to inefficiencies and reduced accuracy in financial forecasts, but it may also provide a cushion for unexpected expenses or challenges.