Master budget

• The master budget is the most important financial plan that guides an organization's operations.
• Strategic planning is focused on long-range goals of five to ten years.
• The budget is an important source of feedback for an organization.
• Most tactical plans are single use plans.
• An annual budget is an example of a single use tactical plan.
• Top management should be directly involved in strategic planning for an organization.
• The financial budget is prepared after the operating budget.
• The operating budget is expressed both in units and dollars.
• The first stage in the budgeting process is the preparation of a sales budget.
• In a manufacturing organization, the production budget is prepared immediately after the sales budget.
• The amount of raw materials that must be purchased can be computed by the following formula: Ending inventory + Materials required - Beginning inventory.
• In estimating factory overhead, it is necessary to separate costs into their fixed and variable components.
• The effect of capital expenditures on the master budget is reflected through cash payments made for acquisition of capital assets.
• The cash budget is constructed after all other budgets have been completed.
• The final step in constructing the master budget is the preparation of pro-forma financial statements for the period.
• A continuous budget is prepared by adding a new budget month as each month expires.
• A participatory budget is developed by both top management and operating personnel.
• A budget manual should include a statement of the budgetary purpose and its desired results.
• A calendar of scheduled budgetary activities helps to coordinate the budgeting process.
• Top management can reduce slack by using a bonus system to link performance to the budget.
• Long-range planning carried out by top management is referred to as strategic planning.
• Short-term planning designed to address a specific set of circumstances is referred to as tactical planning.
• The document that results from the budgeting process is referred to as the master budget.
• A budget that is expressed in terms of both units and dollars is referred to an operating budget.
• A budget that indicates the funds to be generated or consumed during the period is referred to as a financial budget.
• The starting point for any master budget is the sales budget.
• The final step in the master budget process is preparation of the pro-forma financial statements.
• In a manufacturing organization, the budget that is prepared after the sales budget is the production budget.
• The budget that focuses on an organization’s long-term needs is referred to as a capital budget.
• A budget that is prepared by adding a new budget month as each month expires is referred to as a continuous budget.
• A budget that is developed with little input from operating personnel is referred to as an imposed budget.
• A budget that is developed by both top management and operating personnel is referred to as a participatory budget.
• If revenues are intentionally underestimated during the budgeting process, budgetary slack has been created.