Master Budget

Topics: Management, Budgets, Income statement Pages: 2 (379 words) Published: August 15, 2010
Advantages and disadvantages of a master budget
Advantages of a master budget are:
a.It gives an idea where a company wants to go (its goal).. b.It determines what the company has to do in order to achieve this goal. c.It helps the company to realistically project future cash flows. d.This cash flow will enable the company to get certain types of financing. In short a master budget formalizes planning, provides an framework for judging performance and it helps managers to communicate and coordinate their efforts. Disadvantages of a master budget are:

a.A great deal of time is spent in producing such a budget. b.Time factor is the reason a smaller company may not be able to make a master budget especially as it will have a smaller managerial staff. c.Low level of participation in the budget process

d.Lack of acceptance of responsibility for the final budget e.Incentives to lie and cheat in the budget process.
f.Difficulties to obtain accurate sales foremcast.
Reference: retrieved from Budget 1. Identify the major inputs t the master budget and the usefulness of each? A master budget is an extensive analysis of the first year of the long-range plan. It summarizes the planned activities of all subunits of an organization. Master budget includes forecast of sales, expenses, balance sheets and cash receipts and disbursements (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg, 2008, p. 304). The two major part of a mast budget are operating budget and financial budget – Operating budget – focuses on the income statement and its supporting schedules. Financial budget – focuses on the effects that the operating budget and other plans such as capital budgets and repayments of debt will have on cash. 2. Why would company need to create a master budget?

A master budget expresses in quantitative terms and organization’s objectives and possible steps for...
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