Lesson 5.7.1

5.7.1 Budgets and variances Quiz: OCR Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 5.7.1, Budgets and variances: 20 multiple choice questions for the OCR Business (H431), Unit 5: Accounting and finance, written with Revision Ninja.

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The 20 questions

  1. What is a financial plan for future expenditure and revenue called?

    • A budget
    • An annual report
    • A balance sheet
    • A cash statement

  2. What term describes the difference between budgeted figures and actual financial outcomes?

    • Cash flow
    • Variance
    • Profit margin
    • Working capital

  3. An actual revenue of £50,000 against a budgeted £40,000 creates what type of variance?

    • Capital
    • Neutral
    • Favourable
    • Adverse

  4. Budgeted expenditure is £15,000 and actual expenditure is £18,000. What is the variance?

    • £33,000 adverse
    • £3,000 favourable
    • £3,000 adverse
    • £18,000 adverse

  5. What type of budgeting sets every department manager's budget to zero at the start of each period?

    • Flexible budgeting
    • Zero-based budgeting
    • Historical budgeting
    • Incremental budgeting

  6. Which budgeting approach adjusts existing historical figures by adding or subtracting a percentage?

    • Zero-based budgeting
    • Delegate budgeting
    • Capital budgeting
    • Incremental budgeting

  7. Which cash-flow term represents money coming into a business from sales or investments?

    • Cash outflow
    • Cash inflow
    • Working capital
    • Net profit

  8. What is calculated by subtracting total cash outflows from total cash inflows during a period?

    • Net cash flow
    • Gross profit
    • Opening balance
    • Closing balance

  9. A business has an opening balance of £5,000 and net cash flow of -£2,000. What is the closing balance?

    • £7,000
    • £2,000
    • £3,000
    • -£3,000

  10. Which document records historical cash entering and leaving a business over a past period?

    • Income statement
    • Cash-flow statement
    • Balance sheet
    • Cash-flow forecast

  11. How is current assets minus current liabilities defined in business accounting?

    • Gross profit
    • Retained profit
    • Fixed capital
    • Working capital

  12. What name is given to the time taken to convert raw materials back into cash sales?

    • Break-even point
    • Working capital cycle
    • Trade credit period
    • Product life cycle

  13. What is gross profit minus overheads and operational expenses?

    • Net profit
    • Operating profit
    • Sales revenue
    • Gross margin

  14. How is revenue calculated on an income statement?

    • Price ÷ Quantity
    • Price x Quantity
    • Profit + Costs
    • Assets - Liabilities

  15. What primary purpose does a cash-flow forecast serve for a growing business?

    • Valuing total assets
    • Measuring total profit
    • Predicting liquidity shortfalls
    • Calculating tax liability

  16. What term describes an employee held directly accountable for achieving a delegated financial target?

    • Budget holder
    • Credit controller
    • Stakeholder
    • Auditor

  17. Which action would immediately help a business improve an adverse cash-flow position?

    • Delaying supplier payments
    • Increasing credit sales
    • Purchasing extra stock
    • Reducing selling prices

  18. What financial document reports a firm's trading performance and overall profitability over a financial year?

    • Balance sheet
    • Cash-flow forecast
    • Income statement
    • Variance report

  19. Why might variance analysis demotivate employees if targets are set unrealistically high?

    • High profit margins
    • Unplanned excess cash
    • Persistent adverse variances
    • Excessive price discounts

  20. Budgeted sales were £10,000, but actual sales reached £10,800. What is the sales variance?

    • £10,800 favourable
    • £800 neutral
    • £800 favourable
    • £800 adverse

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