Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which element of the budget focuses on incoming funds?

1. Expenditure

2. Borrowing

3. Revenues

4. Forecasting

The correct answer is: Revenues

The correct answer identifies the element of the budget that concentrates specifically on incoming funds. Revenues represent the money that an organization generates from its operations, including sales, services, and other income sources. Understanding and planning for revenues are crucial for an organization's financial health, allowing it to determine how much funding is available for expenses, investments, and other financial commitments. In a budget, revenues are meticulously estimated to ensure that the organization can meet its financial obligations while pursuing growth opportunities. By accurately forecasting revenue, an organization can better align its expenditure plans and effectively manage its cash flow. While the other elements mentioned play important roles in budgeting, they do not primarily focus on incoming funds. For instance, expenditure refers to the outflows of cash, such as costs and expenses incurred by the organization. Borrowing involves acquiring funds through loans or credit but is not a direct representation of internal revenue. Forecasting, while it includes predicting future revenues and expenditures, is more about the process of making projections rather than a specific focus on incoming funds.