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.
More from this Section
- Owner’s equity statement
Owner’s equity statement is a financial statement that summarizes the changes in owner’s equity for a specific period of time. The time period is the same as that covered...
A factor is a finance company or bank that buys receivables from businesses and then collects the payments directly from the customers.
- Direct write-off method
Direct write-off method is a method of accounting for bad debts that involves expensing accounts at the time they are determined to be uncollectible.
- Off-balance-sheet financing
The practice of keeping leased assets and lease liabilities off the balance sheet is referred to as off-balance-sheet financing.
- Raw materials
Raw materials are the basic goods that will be used in production but have not yet been placed into production.
A worksheet is a multiple-column form that companies use in the adjustment process and in preparing financial statements. As its name suggests, the worksheet is a working tool.
A business owned by one person is generally a proprietorship. The owner is often the manager/operator of the business. Small service-type businesses...