The
Definition Of

Master budget

The term “budget” is actually a shorthand term to describe a variety of budget documents. All of these documents are combined into a master budget. The master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period.

The master budget contains two classes of budgets. Operating budgets are the individual budgets that result in the preparation of the budgeted income statement. These budgets establish goals for the company’s sales and production personnel. In contrast, financial budgets are the capital expenditure budget, the cash budget, and the budgeted balance sheet. These budgets focus primarily on the cash resources needed to fund expected operations and planned capital expenditures.

Share it:

More from this Section

  • Aging the accounts receivable
    Aging the accounts receivable refers to the analysis of customer balances by length of time they have been unpaid.
  • Unpaid expenses
    Expenses incurred during the year but for which payment has not been made and will have to be made next year are called unpaid
  • Purchase returns & Allowances
    Purchase return means a return of goods from the buyer to the seller for a cash refund if the purchase was for cash or, credit if the sale was made on credit.
  • Change in accounting principle
    A change in accounting principle occurs when the principle used in the current year is different form the one used in the preceding year.
  • FICA Taxes
    In 1937 Congress enacted the Federal Insurance Contribution Act (FICA). FICA taxes are designed to provide workers with supplemental retirement, employment disability...
  • Paid-in capital
    Paid-in capital is the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.
  • Cost of goods sold
    Cost of goods sold is a category of expenses of a merchandising company which refers to the total cost of merchandise sold during the period.