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Contents
Introduction ....................................................................................................................... 3
Task 1 ................................................................................................................................ 4
Task 2 ................................................................................................................................ 7
Task 3 ................................................................................................................................ 9
Summary ......................................................................................................................... 13
Reference ........................................................................................................................ 14
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Introduction
Budget is an estimate prepared for definite future period either in terms of financial or
non financial terms. Budget is prepared for any course of action or business or state or
prepared and approved prior to a defined period of time, of the policy to be pursed
It is in other words as “detailed plan of action of the business for a definite period of
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Task 1
company's various functional areas, and also includes budgeted financial statements,
strategy that documents expected future sales, productions levels, purchases, future
expenses incurred, capital investments, and even loads to be acquired and repaid. In
other words, the master budget includes all other financial budgets as wells as a
budgeted income statement and balance sheet. Besides, a master budget is a document
that integrates all the individual budgets prepared by the different departments within a
company.
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Master Budget for the year ending of Pushpack & Co
Sales :
500000
Factory Overhead:
Variable:
Fixed:
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depreciation 6000
distribution overheads
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Task 2
A cash budget is an estimation of the cash flows for a business over a specific period of
time. This budget is used to assess whether the entity has sufficient cash to operate. A
cash budget is a budget or plan of expected cash receipts and disbursements during the
period. These cash inflows and outflows include revenues collected, expenses paid, and
loans receipts and payments. In other words, a cash budget is an estimated projection of
Estimates Cash
Receipts:
Total Cash
Estimates Cash
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Payments:
production
Selling &
Distribution
machinery
Total Cash
(A-B)
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Task 3
A fixed budget is a kind of budget where the income and the expenditure are pre-
determined. Irrespective of any fluctuation or change, this budget would remain static.
Companies that are static, execute the same sort of transactions can greatly benefit from
a fixed budget. But wherever there are fluctuations, a fixed budget doesn’t turn out to be
Flexible budget, on the other hand, is a budget that is flexible as per the needs of the
hour. For example, if the company sees that it can sell off more of its products by
expending more in advertisement costs, a flexible budget would help execute that.
That’s why a flexible budget is very effective for companies who go through a lot of
changes during a particular period. It is much more complex than the fixed budget too.
There are three methods to prepare flexible budget. There are Tabular Method ,
Charting Method and Formula Method. Tabular method is about a flexible budget is
prepared for different levels of activity showing different activity or capacity levels in
horizontal columns and budgeted figures against different activity or capacity levels in
the vertical columns. The expenses are usually recorded under three groups, namely,
variable, semi-variable and fixed. Budgeted figures for any level of activity not
About Charting method, it is about an estimate of expenses is made for different levels
of activity by classifying the expenses into three categories, namely, variable, semi-
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variable, and fixed. The estimated expenses are plotted on a graph paper on Y-axis and
level of activity is plotted on X-axis. The budgeted expenses corresponding to the level
of activity attained can then be read out from the chart and the performance of
The last method is Formula method. This is about a budget is prepared for the expected
normal level of activity and variable cost per unit of activity is ascertained.
Flexible Budget
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Particulars 50% capacity 60% capacity 70%capacity
Variable overheads:
fixed overheads:
hours
1. Electricity: Rs. 15,000 is the cost of electricity at 60 % capacity, of which 40% are
= Rs.9,000
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For 50 % capacity variable overheads
2. Repairs and Maintenance: Rs. 1,500 is the cost of repairs and maintenance at 60 %
capacity, of which 80% is fixed overhead, i.e., Rs. 1,200 and variable is Rs. 300 :
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Summary
The master budget is the sum total of all the divisional budgets that is prepared by all
the divisions. Further, it also includes the financial planning, cash-flow forecast and
budgeted profit and loss account and balance sheet of the organization. It is the goal of
Sometimes, it may be misunderstood that master budget is one large budget of the
organization. However, it is not the case. Master Budget is the summary of the
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Reference
1. https://crushthecpaexam.com/accounting-glossary/what-is-a-master-budget/
2. https://www.myaccountingcourse.com/accounting-dictionary/master-budget
3. https://www.accountingtools.com/articles/2017/5/14/master-budget
4. https://efinancemanagement.com/budgeting/master-budget
5. https://www.myaccountingcourse.com/accounting-dictionary/cash-budget
6. http://www.yourarticlelibrary.com/cost-accounting/flexible-budget/flexible-budget-
importance-and-methods-of-preparation/56044
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