Master Budget Essay

CHAPTER

INTRODUCTION TO BUDGETS AND FROM PREPARING MASTER BUDGET

Budget and advantages of budgets:
A budget is (a) the quantitative expression of a proposal plan of action by management for a specified period and (b) an aid to coordinate what needs to be done to implement that plan. A budget includes both financial and non-financial aspects of the plan, and it serves as a blueprint for the company to follow in an upcoming period. A financial budget quantifies management’s expectations regarding income, cash flows, financial position.
Advantages of Budget:
1. Promote coordination and communication among subunits within the company
2. Provide a framework for judging performance and facilitating learning
3. Motivating managers and other employees

Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. For example: A company such as reliance Retail, can have a strategy of providing quality products or service at a low price, another company such as Porsche, can have a strategy of providing a unique product and services that is higher than the products or services of competitors.

The preceding four steps describe the ongoing budget process. The working document at the core of this process is called the master budget. The master budget express management’s operating and financial plans for a specified period (usually a fiscal year), and it includes a set of budget financial statements. The master budget is the initial plan of what the company intends to accomplish in the budget period. The master budget evolves from both operating and financing made by managers.
1. Operating decisions deal with how to best use the limited resources of an organization.
2. Financing decisions deal with how to obtain the funds to acquire those

A controllable cost is any cost that is primarily subject to the influence of a given responsibility canter manager for a given period. A responsibility accounting system could either exclude all uncontrollable costs from a manager’s performance report such costs from the controllable costs. For example- a machine supervisor’s performance report might be confined to direct materials, direct manufacturing labour, power, and machine maintenance costs and might exclude costs such as rent and taxes paid on the