Master Budget | Components of Master Budget | Managerial Accounting
Table of Contents
What is master budget
Master Budget is the combination of different set of separate independent functional budgets reflecting a complete set of financial plan for a business firm. When all of the functional budgets are prepared then at the end maser budget is prepared. The type of functional budget that are prepared depends upon the nature of the business entity.
The master budget is a complete set of books of accounts for future because it accumulates all the financial information in one place. Master budget records and reports the business transaction of the forthcoming periods whereas the financial accounting records and reports the business transaction of already incurred transaction.
Components of Master Budget
- Sales Budget
- Production Budget
- Purchase Budget
- Expenses Budget
- Equipment Purchase Budget
- Cash Budget
Things to Consider before preparing Master Budget
There are some of the information that must be known clearly before formulating the complete set of master budget which include,
- Goal of the Firm
- Policies and Guidelines
- Inventory Policy
- Policies for cash deficit and excess fund
- Standard and allowances
- Product Costing and inventory valuation system
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