What are the components of a master budget?

The components of a master budget include the operating budget, financial budget, and various supporting schedules because these elements work together to provide a comprehensive financial overview of a company’s planned operations and financial performance for a specific period.

The operating budget outlines the income-generating activities of the company, such as sales and production, detailing projected revenues and expenses. This budget is primarily focused on the day-to-day operations and is essential for planning resource allocation and operational strategies.

The financial budget complements the operating budget by aligning it with the company’s financial objectives. This includes cash flow forecasts, budgeted income statements, and balance sheets, which are critical for understanding how operational activities translate into financial results.

Various supporting schedules are included to provide additional details and breakdowns for specific areas of the operating and financial budgets. These schedules may cover items such as sales forecasts, production planning, and capital expenditure plans, ensuring that each area of the budget integrates smoothly.

Together, these components create a cohesive master budget that helps guide the company's financial decisions and operational management.