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Master Budget - A company would need to create a budget...

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Master Budget Lynn Salah ACC/561 The master budget is the primary financial mechanism for and organization and also provides foundation for a traditional financial control system. (James R Martin) The master budget Summaries the planned activities of all subunits of an organization. The master budget includes forecast of sales, expenses, balance sheet, and cash receipts and disbursements. (Horngren, Sundem, Stratton, Burgholer & Schatzberg, 2008 pg 304. The two major parts of a master budget are the operating budget and the financial budget. The operating budget focuses on the income statement and its support schedules or an organization with no sales revenue on budgeted expenses . The financial budget focuses on the effects that the operating budget and other plans it will have on cash balances.
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Unformatted text preview: A company would need to create a budget because the budget gives the company a visual tool that helps managers in both their planning and control functions. Budgets also provide a mechanism for communication between units and across levels of the organization. Some advantages of budgeting are budgets include formalization of planning, provide framework for judging performance and aids managers in communicating and coordinating their efforts. Budgeting also helps the company project cash flow. Some disadvantages of budgeting are managers may be compelled to be bias when they want to increase resources given to their departments when they are reviewed on Performance related to the budgeted amount. Managers may feel the need to cook the books....
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