FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Concept explainers

Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It…
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future…
Question

How do I do a master budget? what are the steps and formulas i will need?

Expert Solution
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Step 1

Budget: Budget is an effective tool to achieve the financial and operational goals of the business. Budget is the key element of the financial planning and it assists managers to control the business costs. Management should set the budgeted amount at reasonable and achievable levels.

Master budget: Master budget is an interrelated budget that collectively summarizes all the planned activities of the business. Master budget is not a single document and it consist the number of interrelated budgets like sales budget, production budget, and cash budget. Master budget helps the management to review the upcoming quarter budget with the monthly amount of budget figures.

Step 2

Steps in master budget

The master budget includes a set of company’s budget plan for production, sales, purchases, labor, overhead, selling and administrative expenses. It helps in further preparation of the budgeted income statement and budgeted balance sheet.

Diagram to show the master budget is as below:

Accounting homework question answer, step 2, image 1

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