All of the basic operating budgets are presented--such as the sales budget and the cash budget--as well as the budgeted income statement and the budgeted balance sheet
. For companies that require more advanced budgeting techniques, best practice examples are available, including flexible budgeting and zero-base budgeting.
From the changes we have identified in our detailed budget preparation, we can evaluate how these affect the three elements of the master budget: the budgeted income statement, the cash budget and the budgeted balance sheets.
The final part of the master budget is the budgeted balance sheets. In practice, a company that uses marginal costing for its management accounts would not normally be expected to prepare them.
To prepare the budgeted balance sheets we first need to obtain the January opening balance sheet.
It comprises the budgeted income statement, the cash budget and the budgeted balance sheets.
The last part of the master budget is the budgeted balance sheets. To prepare these, we must calculate the closing receivables and payables (see panel 13).