Master budget
Master budget is the comprehensive financial plan for a coming period, typically one year.
Also known asmaster budgeting
FrameworkMaster budgeting
See it move
The infographic is a five-step flow diagram tracing the master budget from its revenue source to the cash plan. It begins with the revenue budget (units × selling price), which drives the production budget (units to manufacture); the production budget feeds cost budgets for direct materials, direct labour, overhead, and selling and administrative expenses; those cost budgets combine into a budgeted income statement showing forecast profit; and finally the budgeted income statement, adjusted for the timing of receipts and payments, produces the cash budget. Each step is labelled to show which downstream budget it drives.
Check yourself
An accountant states: 'Once we have planned production volumes, every other component of the master budget follows.' A colleague argues this is the wrong starting point. Who is correct, and why?