Certified Building Official Management Practice Exam

When are estimated revenues recorded in the budgeting process?

1. At the start of fiscal year

2. When transactions occur

3. During the budget preparation

4. At year-end reporting

The correct answer is: During the budget preparation

Estimated revenues are recorded during the budget preparation phase. This is a critical part of the budgeting process because it sets the financial framework for the upcoming fiscal year. By estimating revenues early, organizations can plan their expenditures based on anticipated income, ensuring that financial resources are allocated effectively and that spending does not exceed the expected income. During the budget preparation, estimates are based on various factors, including historical data, economic forecasts, and anticipated changes in the community or market environment. These revenue estimates inform decision-making and help establish spending priorities. The option indicating revenues are recorded at the start of the fiscal year may suggest initiating actual revenue accounting rather than estimating, which is separate from the budgeting process. Recording transactions as they occur pertains to actual revenues recognized in accounting, not the estimation phase. Year-end reporting focuses on the actual revenues received and expenditures made, contrasting with the initial estimates established during the budget preparation.