Budgeting

Overview of the Master Budget

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Priya Kaur

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Christian Bien

Learning Objectives

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What is the Master Budget?
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The master budget holds all the budgets of a business that provide the financial plans to achieve financial and strategic goals of the business. 

The components of the master budget are listed above.

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Operating Budgets
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The operating budgets are a component of the master budget that contains all the budgets that are related to the production of a product or delivery of a service. 


For example, a manufacturing business would have specific budgets related to: 

  • Sales 

  • Direct Material 

  • Direct Labour 

  • Manufacturing Overheads 

This is so that accountants can identify and review the financial performance of specific areas in production.

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Financial Budgets
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The financial budgets are all other budgets that are not operating budgets. Financial budgets include the following: 

  • Cash budget - budget for managing future cash inflows and outflows of the business 

  • Capital Expenditure Budget - budget for organising future capital expenditures and the finance required for them 

  • Budgeted income statement - budget that outlines future income, expenses and profit/loss 

  • Budgeted balance sheet - budget for predicting the business's future assets, liabilities and equity

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Introduction to Budgeting
Overview of the Master Budget
Debtor and Creditor Schedules
How to Construct a Cash Budget
Budgeted Income Statements
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