Operating vs financial budget
Operating vs financial budget: the master budget's two halves — operating budgets plan income-statement activity from sales through expenses, while financial budgets plan cash, capital spending and the budgeted balance sheet.
See it move
Operating budgets — a €480,000 sales budget and a €72,000 selling and administrative expense budget — build up to the budgeted income statement. Financial budgets, such as a €150,000 delivery van's capital expenditure and the cash budget, instead shape the budgeted balance sheet and cash position.
Check yourself
A firm's master budget includes: a sales budget projecting €480,000 of revenue, a selling and administrative expense budget of €72,000, a cash budget projecting a €25,000 month-end cash balance, and a cost of goods sold budget of €260,000. Which one of these four schedules belongs to the financial budget rather than the operating budget?