THE MASTER BUDGET
Introduction
Running a business has two basic elements: planning and controlling. Planning allows the company to be able to achieve the objectives it has set. Management must carefully plan the activities it needs to perform over the weeks, months, and years. During the course of the activities, the company must control them in order to be able to comply with the plan initially established.
Business failure is usually attributed to insufficient planning. In order to avoid the innumerable pitfalls that a company will have to encounter on its way, companies establish plans to help them reduce the risks. The process of planning the future activities of the business is called establishing a master budget.
The master budget
The budget is a plan adopted by the company's management. The master budget includes several detailed budgets that will be combined to form the master budget. It includes specific budgets for budgeted sales, units that will need to be manufactured, raw materials or goods that will need to be purchased, expenses of selling and administrative expenses that will need to be made, long-term assets term that will have to be purchased and the sums of money that will have to be borrowed.
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