Identifying correct budgeting statements

Steps:

• Review the four statements on budgeting principles.
• Evaluate statement 1 for accuracy against standard budgeting definitions.
• Assess statements 2 and 3 for alignment with flexible budgeting practices.
• Check statement 4 against common misconceptions in variance analysis.

Why C is correct:

• Statements 2 and 3 accurately describe budgeting as a planning tool for resource allocation and performance evaluation, per managerial accounting standards.

Why the others are wrong:

• A includes statement 1, which incorrectly claims budgets are rigid and unchangeable.
• B pairs statement 1 with 3, repeating the error of statement 1.
• D includes statement 4, which wrongly states budgets eliminate all financial risks.

Final answer: C