Learning Objectives

What is the Master Budget?

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.

Operating Budgets

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.

Financial Budgets

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