Question

Which would be most helpful when considering a large expenditure that might require repeating payments? Check all that apply.

Answer 1

The correct option is this: CREATING A BUDGET TO CONSIDER FUTURE INCOME AND SPENDING.
Creating a budget that takes into consideration your income and your spending will allows you to make concrete decisions about the amount of money you will be able to pay during repayment and for how long you will be able to pay it.

Answer 2

Option (C) is correct. The creation of the budget is the best option for the large expenditure with periodic payment.

Further Explanation:

Budgeting:

Budget is the estimation of the future financial inflows and outflows of an entity. It is an estimation of the revenue and expenditure of an entity for a certain period which is generally one year. Resources are the source of income or revenue. Budget can be made for a person, group, business, and government. It provides the estimation of future activities that are required to be carried out.  

The required condition for the large expenditure:

When a person has to make several payments with a large sum of money, he should create a budget for these activities. A budget would include the estimation of future inflows and outflows. The budget would help the person so mark his future expenditures, and then he can generate revenue according to his fund requirement.

Thus, the creation of the budget is the best option for the large expenditure with periodic payment.

Justification for the correct and incorrect option:

A.

Careful consideration of short-term goals: This is an incorrect option.

Large expenditure requires a long period. Therefore, a person should also consider long-term goals.

B.

Recording income and spending over the past year: This is an incorrect option.

There should be pre-planned activities for future to neglect any uncertainty.

C.

Creating a budget to consider future income and spending: This is the correct option.

The budget would help in the estimation of future inflows and outflows.

D.

Learning more about different kinds of accounts to manage money: This is an incorrect option. Accounts can be managed by maintaining the ledgers.

E.

Learning about opportunity cost: This is an incorrect option.

The opportunity cost would help calculate the required rate of return.

Learn more:

1. Learn more about cash budget

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2. Learn more about available resources and expenses

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3. Learn more about cash budget

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Answer details:

Grade: Senior School

Subject: Business Studies

Chapter: Budgeting  

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