The revenue and expense categories used in a budget must be the same categories used in financial records, reports, and statements.

• A. True
• B. False
• C. Not specified
• D. Sometimes

Answer: (A)

Consistency in how revenue and expense categories are defined across planning and reporting is essential. When the budget uses the same categories as the general ledger and financial statements, you can accurately compare what you planned with what actually happened. This alignment makes variance analysis meaningful, helps with reconciliation, and provides clear, understandable information to the board and owners. If categories diverge, mapping actual results to the budget becomes confusing, and you lose clarity in reporting and accountability. In practice, you should maintain the same categories or have a direct, transparent mapping between the budget and the financial records, even if the statements present items at different levels of detail.