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Illustrating The Master Budget Relationships

The document illustrates the components of a master budget and how they relate to each other. The master budget includes an operating budget with sales, production, selling and administrative expenses budgets that combine to form a budgeted income statement. It also includes a financial budget with cash receipts, payments and capital expenditure budgets that combine to form a budgeted balance sheet showing expected assets, liabilities and equity. The diagram shows that the operating budget and financial budget are interrelated, with sales and expenses feeding into the projected assets, liabilities and equity.

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Giselle Martinez
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479 views1 page

Illustrating The Master Budget Relationships

The document illustrates the components of a master budget and how they relate to each other. The master budget includes an operating budget with sales, production, selling and administrative expenses budgets that combine to form a budgeted income statement. It also includes a financial budget with cash receipts, payments and capital expenditure budgets that combine to form a budgeted balance sheet showing expected assets, liabilities and equity. The diagram shows that the operating budget and financial budget are interrelated, with sales and expenses feeding into the projected assets, liabilities and equity.

Uploaded by

Giselle Martinez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Illustrating the Master Budget Relationships

Below is a diagram showing the master budget components and how they are

interrelated to each other.


 

The master budget is a comprehensive set of budgets that covers all phases of an
organization’s planned activities for a specific period of time. It has two components
which are the operating budget and the financial budget. The operating budget includes
the expected sales, production budget which are raw materials, direct labor, &
manufacturing overhead, also selling and administrative expenses. When they all
combine, it will form a Budgeted Income Statement where the expected net operating
income of management will show. On the other hand, is the financial budget where it
consists of budgeted cash receipts, budgeted cash payments, capital expenditures
budget. And when they all combine, it will form a Budgeted Balance Sheet where the
expected balance of assets, liabilities, and equity of the company at the end of the period
will show. In conclusion, the diagram above shows the relationship between the
operating budget and the financial budget. Where the sales budget and expenses
budget should be tallied to the assets, liabilities, and equity.

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