Introduction to Budgets
and Preparing the Master Budget
A zero-based budget:
ket h Ch
a r
M earc an
firm ges
res udies s p i n t h
st C ric e
i ng ns pr h a es
tis lespla od ng
r
e sa n uc es
v t m in
Adandotio ix
r om
p
Copyright 2014 Pearson Education, Inc. publishing as Prentice Hall 7 - 13
Types of Budgets
Master budget
Long-range plans
Rolling budgets...
1. Supporting data
1. Basic data
a. Sales budget
b. Cash collections from customers
c. Purchases and cost-of-goods sold budget
d. Cash disbursements for purchases
e. Operating expense budget
f. Cash disbursements for operating expenses
2. Operating Budget:
Prepare budgeted income
statement using basic data in step 1.
Sales
budget
Budgeted purchases:
= Desired ending inventory
+ Cost of goods sold
Beginning inventory
Purchases
Rent
Depreciation
Insurance
Salaries