AMIT KUMAR SINGH {BWU/BBF/18/

HIMANSHU BARETH BWU/BBF/18/

RAUSHAN KUMAR SINGH
{BWU/BBF/18/038}
A budget is a and expenses based on future
formal statement of estimated income plans
and objectives. In other words, a budget is a
document that management makes to
estimate the revenues and expenses for an
upcoming period based on their goals for the
business.
 What is a Master Budget?

Master budget can be defined as the aggregation of all the lower

level budgets which are calculated by various functional areas
of the business and is a strategy that documents the financial
statements, cash flow forecast, financial plans and also capital
investments.
 Major parts of the Master Budget
It has two parts, mainly: the operating budget and the financial budget.

#1 – Operating Budget
It is related to the operating activities of the firm and includes the revenues
generated and expenses incurred. This is basically presented in the form of the
budgeted income statement representing the income-generating activities
carried on within an organization.

#2 – Financial Budget
It shows information about the financial position of the firm.  It represents the
cash budget as well, which gives information about the cash availability. The
financial budget is prepared by making a budgeted balance sheet which uses
information from the operating budgets.
 
 
Advantages
•It acts as a motivation to the staff as they can judge the actual performance with the
desired one and thereby know the areas of improvement.
•serves as a summary budget for the owners as they know what the business is
estimating to earn and what it would incur to reach the goals.
•Since the budget is an estimate for the entire year, it helps in identifying the problems
in advance and thus provide the management with the time to fix the same. Therefore, it
helps in overall planning in advance.
•With the proper budget, it helps to estimate the short term and long-term goals of the
organization and achieve them with proper channelizing of the resources
Conclusion
Thus, the master budget is a one-year planning document used as a
tool for the management to identify its goals well in advance and
channelize the organization resources towards it.  It provides a rough
guideline for the company’s near-term expectations. It should be
noted that the budget should be prepared with the utmost caution as it
affects the operational performance of the entire organization.