Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q21E

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 1233

Short Answer

Describing master budget components

Sarah Edwards, division manager for Pillows Plus, is speaking to the controller, Diana Rothman, about the budgeting process. Sarah states, “I’m not an accountant, so can you explain the three main parts of the master budget to me and tell me their purpose?” Answer Sarah’s question.

Answer

The three main parts of the master budget are the operating budget, capital expenditure budget, and financial budget.

See the step by step solution

Step by Step Solution

Step 1: Meaning of master budget

The master budget is the collection of various budgets and budgeted financial statements.

Step 2: Three main parts of the master budget and their purpose

Following are the three main parts of the master budget

  1. The operating budget: The set of budgets that projects sales revenue, cost of goods sold, and selling and administrative expenses, all of which feed into the cash budget and then the budgeted financial statements.

  2. The capital expenditure budget: The budget that presents the company’s plan for purchasing property, plant, equipment, and other long-term assets.

  3. The financial budget: The budget includes the cash budget and the budgeted financial statements.

Most popular questions for Business-studies Textbooks

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.